Regulatory Stringency, Green Production Offsets and Organizations' Financial Performance

Public Administration Review, Forthcoming

41 Pages Posted: 8 Apr 2008

See all articles by Nicole Darnall

Nicole Darnall

Arizona State University - College of Global Futures; School of Sustainability; Sustainable Purchasing Research Initiative

Date Written: 2008

Abstract

While some scholars have argued that environmental regulatory pressures constrain organizations' financial opportunities, others maintain that environmental regulations can spur product and technology innovations and encourage greater operational efficiencies. Advocates on both sides have evidence in support of their positions. However, when considering both perspectives in tandem and recognizing that other factors (which are correlated with a company's environmental performance) may be associated with improved financial performance, we may find that neither position is valid or both are. Relying on OECD data for manufacturing facilities operating in Canada, France, Germany, Hungary, Japan, Norway, and the United States, this study shows that more stringent environmental policy regimes are related to diminished firm profits. Yet, organizations that are motivated by a green production focus (i.e., enhancing internal efficiencies and new product and technology development) are more likely to improve their environmental performance. They also demonstrate a greater probability of benefiting financially, thereby offsetting the cost of regulation or accruing a net gain.

Keywords: environmental regulation, environmental performance, financial performance, environmental efficiency, regulatory stringency, innovation

JEL Classification: M14, N60, M11

Suggested Citation

Darnall, Nicole, Regulatory Stringency, Green Production Offsets and Organizations' Financial Performance (2008). Public Administration Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1117807

Nicole Darnall (Contact Author)

Arizona State University - College of Global Futures; School of Sustainability ( email )

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HOME PAGE: http://isearch.asu.edu/profile/1811617

Sustainable Purchasing Research Initiative ( email )

Arizona State University
https://sustainability.asu.edu/spri/
United States

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