Do green investments improve firm performance? Empirical evidence from Ireland

Iulia Siedschlag () and Weijie Yan

Technological Forecasting and Social Change, 2023, vol. 186, issue PB

Abstract: International evidence suggests that the transition to a more sustainable development requires firms' investments aimed at improving environmental quality. However, existing evidence on how such green investments affect firm performance is inconclusive. To help address this evidence gap, this paper examines the impact of firms' green investments on a range of their performance outcomes, including the growth of output, employment, productivity, export intensity, and energy intensity. The analysis uses firm-level data from Ireland's industry sector over the period of 2008–2016. To identify causal effects, a difference-in-difference propensity score matching is used. In addition to average effects across all firms, we also explore and quantify heterogenous effects of such investments, taking industry and firm heterogeneity into consideration. Our results indicate that, on average, in the medium-term, green investments have positive effects on firms' performance. Taking into account firm heterogeneity, we find that the effects are stronger for firms which are larger, foreign-owned, more productive, and in low-tech industries. This evidence suggests that environmental quality linked to green investments and firm performance can go together, although not all firms benefit equally from green investments.

Keywords: Environmental policy; Sustainable growth; Green investments; Firm performance; Firm heterogeneity (search for similar items in EconPapers)
JEL-codes: D24 L25 Q50 Q58 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:186:y:2023:i:pb:s0040162522007028

DOI: 10.1016/j.techfore.2022.122181

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