Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis

Paul Lanoie (), Jérémy Laurent-Lucchetti, Nick Johnstone () and Stefan Ambec ()
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Paul Lanoie: IEA, HEC Montréal, http://www2.hec.ca/iea/

No 07-06, Cahiers de recherche from HEC Montréal, Institut d'économie appliquée

Abstract: Jaffe and Palmer (1997) present three distinct variants of the so- called Porter Hypothesis. The “weak” version of the hypothesis posits that environmental regulation will stimulate certain kinds of environmental innovations. The “narrow” version of the hypothesis asserts that flexible environmental policy regimes give firms greater incentive to innovate than prescriptive regulations, such as technology-based standards. Finally, the “strong” version posits that properly designed regulation may induce cost-saving innovation that more than compensates for the cost of compliance. In this paper, we test the significance of these different variants of the Porter Hypothesis using data on the four main elements of the hypothesised causality chain (environmental policy, research and development, environmental performance and commercial performance). The analysis is based upon a unique database which includes observations from approximately 4200 facilities in seven OECD countries. In general, we find strong support for the “weak” version, qualified support for the “narrow” version, and qualified support for the “strong” version as well.

Keywords: Porter hypothesis; environmental policy; innovation; environmental performance; business performance. (search for similar items in EconPapers)
JEL-codes: L21 M14 Q52 Q55 Q58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff, nep-env, nep-ino and nep-reg
Date: 2007-06
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Related works:
Working Paper: Environmental policy, innovation and performance: new insights on the Porter hypothesis (2007)
Working Paper: Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis (2007)
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