Environmental Risk and Green Innovation: Evidence From Evacuation Spills

Abstract

Exploring evacuation spill information from the U.S. Coast Guard’s National Response Center database, we examine how firms alter their green innovation activities and strategies in response to environmental spills occurring near their headquarters. We find that, in response to nearby environmental spills, firms increase both environmental innovation input and output. Increases in managers’ perceived risk and compliance cost, in part due to public outrage and reprobation, as well as redeployment of human capital are two plausible underlying economic channels through which environmental risk affects firm innovation activities.

Keywords: Environment Risk, Green Innovation, Compliance Cost, Human Capital Redeployment

JEL Classification: O30, Q50, G30