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The effect of environmentally sustainable practices on firm R&D: International evidence

Rajabrata Banerjee and Kartick Gupta

Economic Modelling, 2019, vol. 78, issue C, 262-274

Abstract: Using a comprehensive dataset covering 42 countries spanning 2002–2013, this paper empirically examines the effect of environmentally sustainable practices (ESP) on R&D intensity in firms. We use three separate firm-level ESP scores that distinguish between the mandatory and voluntary compliance of environmental regulations mandated within an industry and a country. Our main finding is that an increase in ESP increases R&D intensity. Therefore, ESP encourages a higher number of innovations and there is a negligible trade-off between these two factors of firm performance. Further, the positive effect of ESP is stronger in countries where institutional quality and R&D infrastructure supports are superior. Our results have important policy implications for firms, investors and national governments.

Keywords: Environment; Sustainability; R&D; Institutional quality (search for similar items in EconPapers)
JEL-codes: Q01 O30 F23 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.econmod.2018.09.024

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