The Impact of Environmental Regulation on Firm and Country Competitiveness: A Meta-Analysis of the Porter Hypothesis

62 Pages Posted: 16 Dec 2015 Last revised: 15 Aug 2017

See all articles by Mark A. Cohen

Mark A. Cohen

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

Adeline Tubb

University College London

Date Written: August 14, 2017

Abstract

Since the early 1990s, the validity of the Porter Hypothesis has been the focus of intense research efforts to establish whether well-designed environmental regulation may enhance – rather than reduce – competitiveness. However, little consensus exists on the extent to which (if at all) environmental regulation might generate profitability enhancing innovation offsets. In response to this lack of clarity in the literature and the pressing public policy implications of the Porter Hypothesis, this paper reports on a meta-analysis of 103 publications which estimate the relationship between environmental regulation and firm or country-level productivity or competitiveness. We find considerable heterogeneity in both the sign and significance level of the over 2,000 estimated “effect sizes” found in these studies. When systematically comparing all studies, we find evidence that a positive effect of environmental regulation on competitiveness is more likely at the state, region or country level, compared to the facility, firm or industry level – although in both cases the most likely scenario is a statistically insignificant effect. These findings are consistent with the strong version of the Porter Hypothesis whereby strict but flexible environmental regulations induce innovation and over time increase country-level competitiveness.

Keywords: Porter Hypothesis, environmental policy, competitiveness, financial performance

JEL Classification: Q52, Q58, H23, L21, F14

Suggested Citation

Cohen, Mark A. and Tubb, Adeline, The Impact of Environmental Regulation on Firm and Country Competitiveness: A Meta-Analysis of the Porter Hypothesis (August 14, 2017). Vanderbilt Owen Graduate School of Management Research Paper No. 2692919. Available at SSRN: https://ssrn.com/abstract=2692919 or http://dx.doi.org/10.2139/ssrn.2692919

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
United States
202-328-5000 (Phone)

Adeline Tubb

University College London ( email )

Gower Street
London, WC1E 6BT
United Kingdom

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