Firms’ Transition to Green: Innovation versus Lobbying

67 Pages Posted: 22 Dec 2022 Last revised: 16 Jan 2024

See all articles by Sungjoung Kwon

Sungjoung Kwon

Wayne State University - Mike Ilitch School of Business

Michelle Lowry

Drexel University; European Corporate Governance Institute (ECGI)

Michela Verardo

London School of Economics & Political Science (LSE)

Date Written: January 11, 2024

Abstract

Innovation in green technologies is a crucial driver of the transition to greener modes of production and consumption. However, there is considerable uncertainty regarding the speed of this transition. Motivated by the fact that regulatory developments represent one key source of uncertainty, we examine how firms complement their innovation activities with efforts to influence the regulatory agenda through lobbying. On average, firms engaging in green innovation do not lobby to increase demand for these products and services. Rather, many green innovators represent firms whose current business operations are mostly brown and firms with more market power; these firms employ lobbying to maintain the status quo, i.e., to protect their brown cash flows into the future. Relative to other green innovators, firms that engage in more brown lobbying have higher rates of future adverse environmental incidents. Evidence suggests that environmental rating agencies do not completely recognize these effects.

Keywords: Green innovation, Environmental lobbying

Suggested Citation

Kwon, Sungjoung and Lowry, Michelle B. and Verardo, Michela, Firms’ Transition to Green: Innovation versus Lobbying (January 11, 2024). European Corporate Governance Institute – Finance Working Paper No. 921/2023, Available at SSRN: https://ssrn.com/abstract=4300352 or http://dx.doi.org/10.2139/ssrn.4300352

Sungjoung Kwon (Contact Author)

Wayne State University - Mike Ilitch School of Business ( email )

2771 Woodward Ave
Detroit, MI 48201

Michelle B. Lowry

Drexel University ( email )

3141 Chestnut St
Philadelphia, PA 19104
United States

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Michela Verardo

London School of Economics & Political Science (LSE) ( email )

Department of Finance
Houghton Street
London, WC2A 2AE
United Kingdom

HOME PAGE: http://personal.lse.ac.uk/verardom/

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
714
Abstract Views
1,992
Rank
69,382
PlumX Metrics