Is Firm-Level Clean or Dirty Innovation Valued More?
The European Journal of Finance
96 Pages Posted: 2 Oct 2019 Last revised: 23 Jun 2020
Date Written: June 05, 2020
We examine how Tobin's Q is linked to `clean' and `dirty' innovation and innovation efficiency at the firm level. Clean innovation relates to patented technologies in areas such as renewable energy generation and electric cars, whereas dirty innovation relates to fossil-based energy generation and combustion engines. We use a global patent data set, covering over 15,000 firms across 12 countries. We find strong and robust evidence that the stock market recognizes the value of clean innovation and innovation efficiency and accords higher valuations to those firms that engage in successful clean research and development activities. The results are substantively invariant across innovation measurement, model specifications, estimators adopted, select sub-samples of firms and United States and European patent offices.
Keywords: innovation, research and development, patents, citations, clean technologies, dirty technologies, market value
JEL Classification: G35, G32, C58
Suggested Citation: Suggested Citation