Does Extended Producer Responsibility Improve Eco-Innovation: An Empirical Study of Product Take-Back Programs
32 Pages Posted: 11 Nov 2020
Date Written: September 1, 2020
Problem Definition: Extended producer responsibility (EPR) is an important policy instrument to address environmental risks in solid waste disposal. Whether EPR incentivizes a producer's eco-innovation is an ongoing debate among operations researchers and policymakers. Our research builds on a quasi-experiment design and explores the causal relationship between EPR and eco-innovation.
Relevance: Most of the prior EPR studies are built on analytical models. Our research adds to this field by providing a first empirical evidence to show EPR effectiveness in promoting innovation.
Methodology: Using firm-level take-back program as an important initiative of EPR and eco-patent as a proxy of eco-innovation, we leverage a difference-in-differences approach with propensity score matching and staggered treatment adjustment to identify the causal relationship between EPR and eco-innovation.
Results: We find that adopting take-back programs significantly motivates producers to develop eco-innovation. We also find that producers' program scales and industries play significant roles in the take-back effect.
Managerial Implications: Our research provides implications for both producers and policymakers. A growing number of states in the United States have set a goal to eliminate landfill/incineration for product end-of-life treatment, and eco-innovation is essential to achieve this goal. Our findings suggest that policymakers may promote individual take-back programs to incentivize eco-innovation. While taking on a new role in a take-back initiative is challenging, producers that eco-innovate may enhance their competitive advantage in the long run by reducing environmental risks, optimizing production and recycling processes, and satisfying the increasing customer demand in green products and services.
Keywords: Extended producer responsibility, Take-back, Eco-innovation, Difference-in-differences
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