Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis

40 Pages Posted: 24 Jul 2011

See all articles by Paul Lanoie

Paul Lanoie

HEC Montreal - Institute of Applied Economics

Jérémy Laurent‐Lucchetti

affiliation not provided to SSRN

Nick Johnstone

International Energy Agency - Energy Statistics Division

Stefan Ambec

National Institute for Agricultural Research (INRA) - GAEL

Date Written: Fall 2011

Abstract

Jaffe and Palmer (1997) present three distinct variants of the so‐called Porter Hypothesis. The “weak” version of the hypothesis posits that environmental regulation will stimulate environmental innovations. The “narrow” version of the hypothesis asserts that flexible environmental policy regimes give firms greater incentive to innovate than prescriptive regulations, such as technology‐based standards. Finally, the “strong” version posits that properly designed regulation may induce cost‐saving innovation that more than compensates for the cost of compliance. In this paper, we test the significance of these different variants of the Porter Hypothesis using data on the four main elements of the hypothesised causality chain (environmental policy, research and development, environmental performance, and commercial performance). The analysis draws upon a database that includes observations from approximately 4,200 facilities in seven OECD countries. In general, we find strong support for the “weak” version, qualified support for the “narrow” version, but no support for the “strong” version.

Suggested Citation

Lanoie, Paul and Laurent‐Lucchetti, Jérémy and Johnstone, Nick and Ambec, Stefan, Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis (Fall 2011). Journal of Economics & Management Strategy, Vol. 20, Issue 3, pp. 803-842, 2011, Available at SSRN: https://ssrn.com/abstract=1893358 or http://dx.doi.org/10.1111/j.1530-9134.2011.00301.x

Paul Lanoie (Contact Author)

HEC Montreal - Institute of Applied Economics ( email )

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

Jérémy Laurent‐Lucchetti

affiliation not provided to SSRN

Nick Johnstone

International Energy Agency - Energy Statistics Division ( email )

United States

Stefan Ambec

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

BP 47
38040 Grenoble
France

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