Furthermore, cost savings may be more important for eco-innovations compared to other innovations because they are often linked to a reduction in material or energy consumption. Regulation is crucial for the realization of eco-innovation activities. This is the case because there may not be any clear economic incentives to develop new environmentally benign products and processes. From a traditional point of view, environmental policy imposes additional production costs, potentially reducing the international competitiveness of a firm .
However, in contrast to that view is the issue of possible innovation offsets; i.
These cost savings lead to increased competitiveness, so that additional production costs may actually be over-compensated for as a result of the environmental measures taken. Regulation might provide signals that reduce information deficits about the incomplete utilization of resources or the minimizing of discharges . As an example, mandatory environmental audits push firms to search for causes of high-energy consumption, and presumably to address said causes, if feasible. From an international perspective, new technologies resulting from regulation-induced eco-innovations may lead to first-mover advantages for regulated firms and their related suppliers in the value chain.
A good example is the success of Danish wind turbine producers. Early political support led to the establishment of a successful wind energy industry, which became one of the successful first movers on an international scale.
The Porter hypothesis assumes imperfect information, organizational problems, and market failures. It is important to mention that not all types of environmental regulations lead to innovation offsets . For instance, regulations that explicitly require the implementation of specific end-of-pipe technologies, such as filters, will certainly raise production costs. In general, the empirical literature shows that market-based instruments, such as eco-taxes or tradable permits, are more likely to trigger eco-innovation compared to technology-based standards .
For example, introduction of the tradable permit system for sulfur dioxide emissions in the US led to improved removal efficiency compared to the old technology-based regulatory system . Another example shows that price-based policy had a positive and significant influence on innovations related to solar, biomass, and waste energy . Unfortunately, because of the lack of adequate data, most of the studies are not based on experimental or quasi-experimental designs where the stringency or the choice of different environmental regulations vary across otherwise similar firms or industries.
Based on a patent analysis, the role of environmental regulation for eco-innovation has been analyzed . Pollution abatement expenditures serve as an indicator for policy stringency. The authors find that abatement expenditures were positively correlated to environmental innovation. Alternate patent studies also show that innovation decisions were mainly driven by regulation activities.
The effects of regulation are shown to vary between different environmental technology fields. For instance, end-of-pipe technologies are mainly triggered by regulation, whereas cost savings and environmental management systems seem to be more important for promoting cleaner technologies. Furthermore, regulation and cost savings were identified in a study based on panel data as the main determinants for eco-innovation .
However, another paper by the same author shows that the influence of regulation varies significantly for different environmental technology fields. Whereas current and expected government regulations have a particular effect on air quality, water, or noise emissions, hazardous substances treatment, and the recyclability of products, they are less important for material and energy savings. The Porter hypothesis tends to be confirmed with respect to innovations that improve resource efficiency, whereas end-of-pipe measures seem to reduce firm profitability.
Different variants of the Porter hypothesis are tested using an OECD database for seven countries, for instance.
The strong version, postulating that regulation-induced cost savings must over-compensate the compliance costs, is however not supported . The impact of different policy instruments on renewable energy technologies has also been analyzed . Based on a patent analysis, the authors show the high importance of feed-in tariffs for solar energy, whereas this policy instrument does not promote more cost-competitive technologies, such as wind power.
Most of these studies concentrate on the effects of environmental regulation with respect to the directly regulated firms.
An overall assessment of the effects of environmental policy would require the analysis of additional effects and channels. One such study analyzes indirectly induced innovation in regulated and unregulated firms resulting from regulation-induced costs by evaluating the impacts from higher output prices and knowledge spillovers. A further strand of empirical literature analyzes whether regulation-induced environmental innovation efforts lead to a crowding out of other innovation activities.
Finally, many studies show that environmental management tools, specialized organizational arrangements e. The important role of market demand for the realization of eco-innovation is also confirmed by many other empirical analyses. For instance, customer benefits are important for the introduction of environmental innovations if the environmental impact of a product denotes a higher added value for the customer .
This may be problematic for green electricity, for example, but environmental product innovations such as food or baby clothes may lead to substantial customer benefits. The relationship between eco- innovation and employment within a firm strongly depends on the nature of innovation, especially with respect to process and product innovation Figure 3.
Concerning process innovations, a further distinction between end-of-pipe and cleaner technologies is important. In general, process innovations may induce negative employment effects if they are accompanied by higher labor productivity, assuming a steady output. In other words, given the same output quantity, a more efficient process will generally reduce the associated labor requirements, thereby eliminating the need for some jobs.
Synergies between environmental, labour market and innovation policy are apparent but they are however small and specific. Volume 10 , Issue 3. The full text of this article hosted at iucr. If you do not receive an email within 10 minutes, your email address may not be registered, and you may need to create a new Wiley Online Library account. If the address matches an existing account you will receive an email with instructions to retrieve your username. Business Strategy and the Environment Volume 10, Issue 3.
Tools Request permission Export citation Add to favorites Track citation. Share Give access Share full text access. Share full text access. In return, employment affects environmental performance, but the effect differs due to the different forms of environmental performance. For dirty industries, the impact of environmental performance on employment through technical effects is more significant and, thus, a win—win situation of ecological environment and employment stability will be achieved.
This research has practical significance regarding how to scientifically and effectively carry out environmental regulation and green management. The current mode of economic development in China is typified by high growth, energy consumption, and pollution characteristics, and this has caused great stress on both energy consumption and the environment [ 1 ]. Environmental issues and employment issues bear the brunt. The manufacturing industry is at the industrial center and at the core of maintaining stable economic development.
However, development of the manufacturing industry inevitably brings about deterioration of the environment. Focusing on solving outstanding environmental problems, prevention and control of the source, and environmental pollution such as air pollution, water pollution, soil pollution, and solid waste pollution have become increasingly prominent in social and economic development. Under the guidance of the dual national policy of environmental protection and energy conservation, the problems of resource waste and pollution emissions in dirty industries and the phenomenon of breaking the ecological balance have been greatly alleviated.
Through a combination of quantitative and qualitative research, a dynamic model is built to simulate the long- and short-term effects of environmental performance and employment in both clean and dirty industries, to deepen the understanding of this interactive shock response process.
Regarding whether sustainability and economic benefits can be mutually beneficial, domestic and foreign scholars are in disagreement. At the beginning, the mainstream academic circles were restrained, that environmental regulation inhibited the growth of economic benefits by increasing the production cost of enterprises and the price of labor factors [ 2 ].
Some researchers verified similar conclusions through the choice of companies in the chemical, petroleum, pulp and paper, and furniture manufacturing industries [ 3 , 4 ]. In addition to reducing the economic output by reducing industrial output, environmental regulation also has a negative impact on economic efficiency through the decline of industrial productivity.
Dufour et al. Conversely, some scholars support environmental performance to promote economic growth by improving output or increasing productivity. Boyd and Mc Clelland pointed out that environmental regulation may lead to a reduction in potential output but, at the same time, there may be a coexistence of increased output and reduced pollution, thereby achieving a win—win situation for environmental protection and economic growth [ 10 , 11 , 12 ].
It is recommended that companies combine cleaner production and environmental management to increase the results of sustainable innovation and financial gain [ 14 ]. However, such results do not apply to all regions. Martin et al. Environmental productivity and corporate efficiency are found greater for export-oriented firms [ 15 ]. Brannlund et al. Lanoie, Lajeunesse and Patry found that there was a lag in the impact of environmental performance on firm productivity [ 17 ], where technical change was the main driver of most total factor productivity growth [ 18 ].
A specific characteristic of the curve is that the environmental quality will show an inverted U-shaped trend with economic growth, that is, the environmental quality will gradually deteriorate and then gradually improve [ 22 , 23 ]. Domestic scholars have taken the data of various industries in China as the research object and also discover the differences, interactivity, lag and complexity of environmental regulation and the industrial growth impact mechanism [ 24 , 25 , 26 , 27 , 28 ].
So, can environmental performance drive employment growth?