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The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness?

21 Pages Posted: 26 Sep 2010  

Paul Lanoie

HEC Montreal - Institute of Applied Economics

Stefan Ambec

National Institute for Agricultural Research (INRA) - GAEL

Mark A. Cohen

Vanderbilt University - Strategy and Business Economics; Vanderbilt University - Law School; Resources for the Future

Stewart Elgie

University of Ottawa - Common Law Section

Multiple version iconThere are 2 versions of this paper

Date Written: September 24, 2010

Abstract

Twenty years ago, Harvard Business School economist and strategy professor Michael Porter stood conventional wisdom about the impact of environmental regulation on business on its head by declaring that well designed regulation could actually enhance competitiveness. The traditional view of environmental regulation held by virtually all economists until that time was that requiring firms to reduce an externality like pollution necessarily restricted their options and thus by definition reduced their profits. After all, if there are profitable opportunities to reduce pollution, profit maximizing firms would already be taking advantage of those opportunities. Over the past 20 years, much has been written about what has since become known simply as the Porter Hypothesis (“PH”). Yet, even today, there is conflicting evidence, alternative theories that might explain the PH, and oftentimes a misunderstanding of what the PH does and does not say. This paper provides an overview of the key theoretical and empirical insights on the PH to date, draw policy implications from these insights, and sketches out major research themes going forward.

Keywords: Porter Hypothesis, environmental policy, innovation, performance

Suggested Citation

Lanoie, Paul and Ambec, Stefan and Cohen, Mark A. and Elgie, Stewart, The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness? (September 24, 2010). CIRANO - Scientific Publications 2010s-29. Available at SSRN: https://ssrn.com/abstract=1682001 or http://dx.doi.org/10.2139/ssrn.1682001

Paul Lanoie (Contact Author)

HEC Montreal - Institute of Applied Economics ( email )

3000, ch. de la Côte-Ste-Catherine
Montréal, Quebec H3T 2A7
Canada

Stefan Ambec

National Institute for Agricultural Research (INRA) - GAEL ( email )

BP 47
38040 Grenoble
France

Mark A. Cohen

Vanderbilt University - Strategy and Business Economics ( email )

Nashville, TN 37203
United States
615-322-0533 (Phone)

HOME PAGE: http://https://business.vanderbilt.edu/bio/mark-cohen/

Vanderbilt University - Law School

131 21st Avenue South
Nashville, TN 37203-1181
United States

Resources for the Future ( email )

1616 P Street, NW
Washington, DC 20036
United States
202-328-5000 (Phone)

Stewart Elgie

University of Ottawa - Common Law Section ( email )

57 Louis Pasteur Street
Ottawa, K1N 6N5
Canada

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