The effects of publicly supported environmental innovations on firm growth in the European Union

Florian Flachenecker (florian.flachenecker@ec.europa.eu), Martin Kornejew (martin.kornejew@uni-bonn.de) and Mario Lorenzo Janiri (mario.janiri@ext.ec.europa.eu)
Additional contact information
Florian Flachenecker: European Commission, Joint Research Centre, Brussels, Belgium
Martin Kornejew: University of Bonn, Bonn, Germany
Mario Lorenzo Janiri: European Commission, Joint Research Centre, Brussels, Belgium

No 721, SEEDS Working Papers from SEEDS, Sustainability Environmental Economics and Dynamics Studies

Abstract: Enabling innovations with environmental benefits is considered crucial to align economic and environmental objectives. We estimate the economic effects of publicly supported environmental innovations for the business economy of 13 Member States of the European Union. Using an instrumental variable approach to address the inherent endogeneity problem, we find that the average publicly supported environmental innovation increases firm employment by 9%, turnover by 12% and market share by 12% over a two-year period. Notwithstanding country and sector heterogeneity, essentially all countries and sectors show positive effects. Moreover, the results are not driven by highly innovative firms but are based on small and medium-sized enterprises with limited innovation activity. Thus, this paper provides robust evidence that public financial support for environmental innovations can align economic and environmental objectives for a broad set of firms, sectors and countries. Public policy supporting environmental innovations might therefore facilitate the recovery and transition to a more sustainable economy.

Keywords: eco-innovation; environmental innovation; competitiveness; firm growth; European Union (search for similar items in EconPapers)
JEL-codes: C26 O31 O44 Q32 Q56 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2021-06, Revised 2021-06
New Economics Papers: this item is included in nep-eec, nep-ent, nep-env, nep-res, nep-sbm and nep-tid
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http://www.sustainability-seeds.org/papers/RePec/srt/wpaper/0721.pdf First version, 2021 (application/pdf)
http://www.sustainability-seeds.org/papers/RePec/srt/wpaper/0721.pdf Revised version, 2021 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:srt:wpaper:0721

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