Environmental Innovations and Profitability: How Does it Pay to Be Green?

28 Pages Posted: 30 Sep 2013

See all articles by Claudia Ghisetti

Claudia Ghisetti

University of Ferrara - Department of Economics and Management

Klaus Rennings

Center for European Economic Research (ZEW)

Date Written: September 30, 2013

Abstract

Much of the empirical literature analyzing the relation between environmental innovation and competitiveness has focused on the question whether "it pays to be green". We differentiate between different types of environmental innovations, which will be disentangled in those aiming at reducing the negative externalities and those allowing for efficiency increases and cost savings. What we analyze is at first the extent to which these two typologies have impacts on firms’ profitability with opposite signs, and, secondly, whether the motivations driving the adoption of those innovations make the difference in terms of economic gains. We find empirical evidence that both the typology of Environmental Innovation and the driver of their adoption affect the sign of the relationship between competitiveness and environmental performance. The empirical strategy is based on a sample of German firms and makes use of a merge of two waves of the Mannheim Innovation Panel in 2011 and 2009 that allow overcoming some endogeneity issues which may arise in a cross-section setting.

Keywords: Profitability, Externality Reducing Innovations, Energy and Material Efficiency Innovations, Mannheim Innovation Panel

JEL Classification: Q55, Q20, M10, K32

Suggested Citation

Ghisetti, Claudia and Rennings, Klaus, Environmental Innovations and Profitability: How Does it Pay to Be Green? (September 30, 2013). ZEW - Centre for European Economic Research Discussion Paper No. 13-073. Available at SSRN: https://ssrn.com/abstract=2333629 or http://dx.doi.org/10.2139/ssrn.2333629

Claudia Ghisetti

University of Ferrara - Department of Economics and Management ( email )

C.so Ercole I° d'Este 37
Ferrara, 44100
Italy

Klaus Rennings (Contact Author)

Center for European Economic Research (ZEW) ( email )

P.O. Box 10 34 43
L 7,1 D-68161 Mannheim
Germany

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