Empirical Determinants of Innovation in European Countries: Testing the Porter's Hypothesis

Elena Makrevska Disoska, Jasna Tonovska, Katerina Toshevska-Trpcevska, Dragan Tevdovski and Viktor Stojkoski

MPRA Paper from University Library of Munich, Germany

Abstract: We investigate the interplay between innovation and productivity, emphasizing the role of environmental regulations on the innovation behaviours of European firms. Anchored in the Porter hypothesis, which proposes that environmental regulations can drive technological innovation and bolster commercial competitiveness, we utilize the CDM model (Crépon, Duguet, and Mairesse, 1998) for in-depth analysis. Our approach begins by pinpointing the factors that shape firms' decisions to innovate and the associated investments, employing the Heckman correction model. Subsequently, we adopt the three-stage least squares (3SLS) methodology to analyse both innovation outputs and firm productivity in tandem. Drawing data from the Community Innovation Survey (CIS) 2018, our structured examination unveils how diverse innovation drivers can elevate labor productivity in varied institutional landscapes. By contrasting the performance of South Europe (comprising Greece, Spain, Portugal) and Central Eastern Europe (countries like Bulgaria, Estonia, Hungary) against a German benchmark, our research offers a nuanced understanding of environmental regulations' influence on innovation and productivity across European contexts.

Keywords: innovation; productivity; CDM model; CIS; Porter`s hypothesis (search for similar items in EconPapers)
JEL-codes: C33 C36 O31 O33 (search for similar items in EconPapers)
Date: 2023-09-29
New Economics Papers: this item is included in nep-cse, nep-eec, nep-eff, nep-ind, nep-ino, nep-sbm, nep-tid and nep-tra
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