This research was undertaken when Lanoie was on sabbatical at the INRA (Institut National de Recherche Agronomique) research laboratory of Grenoble. Funding from INRA, FQRSC and the chair on “Sustainable Finance and Responsible Investments” is gratefully acknowledged. We also thank the OECD for providing us with the data. The views expressed herein are those of the authors, and not the OECD or its member countries.
Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis
Article first published online: 22 JUL 2011
© 2011 Wiley Periodicals, Inc.
Journal of Economics & Management Strategy
Volume 20, Issue 3, pages 803–842, Fall 2011
How to Cite
Lanoie, P., Laurent-Lucchetti, J., Johnstone, N. and Ambec, S. (2011), Environmental Policy, Innovation and Performance: New Insights on the Porter Hypothesis. Journal of Economics & Management Strategy, 20: 803–842. doi: 10.1111/j.1530-9134.2011.00301.x
- Issue published online: 22 JUL 2011
- Article first published online: 22 JUL 2011
Jaffe and Palmer (1997) present three distinct variants of the so-called Porter Hypothesis. The “weak” version of the hypothesis posits that environmental regulation will stimulate environmental innovations. The “narrow” version of the hypothesis asserts that flexible environmental policy regimes give firms greater incentive to innovate than prescriptive regulations, such as technology-based standards. Finally, the “strong” version posits that properly designed regulation may induce cost-saving innovation that more than compensates for the cost of compliance. In this paper, we test the significance of these different variants of the Porter Hypothesis using data on the four main elements of the hypothesised causality chain (environmental policy, research and development, environmental performance, and commercial performance). The analysis draws upon a database that includes observations from approximately 4,200 facilities in seven OECD countries. In general, we find strong support for the “weak” version, qualified support for the “narrow” version, but no support for the “strong” version.