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

Resources for the Future Discussion Paper No. 11-01

31 Pages Posted: 9 Feb 2011

See all articles by Stefan Ambec

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

Paul Lanoie

HEC Montreal - Institute of Applied Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 18, 2011

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 profitable opportunities existed 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, we find conflicting evidence and 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 into the PH to date, draws policy implications from these insights, and sketches out major research themes going forward.

Keywords: Porter Hypothesis, Environmental Policy, Innovation, Performance

Suggested Citation

Ambec, Stefan and Cohen, Mark A. and Elgie, Stewart and Lanoie, Paul, The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness? (January 18, 2011). Resources for the Future Discussion Paper No. 11-01. Available at SSRN: https://ssrn.com/abstract=1754674 or http://dx.doi.org/10.2139/ssrn.1754674

Stefan Ambec

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

BP 47
38040 Grenoble
France

Mark A. Cohen (Contact Author)

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
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202-328-5000 (Phone)

Stewart Elgie

University of Ottawa - Common Law Section ( email )

57 Louis Pasteur Street
Ottawa, K1N 6N5
Canada

Paul Lanoie

HEC Montreal - Institute of Applied Economics ( email )

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

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