Regulation and firm perception, eco-innovation and firm performance

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Doran, Justin
Ryan, Geraldine
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Purpose - Recent reports argue that eco-innovation is the key to realising growth. This paper examines the factors which drive eco-innovation and tests if eco-innovating firms perform better than non-eco-innovating firms. We provide insights into the role government regulation can play in directing and stimulating eco-innovation.Design/methodology/approach - The approach utilised by this paper is empirical in nature. Using a sample of 2,181 firms, gathered as part of the Irish Community Survey 2006-2008, we estimate a modified innovation production function in order to assess the impact of regulation, consumer expectations and voluntary agreements on the performance of ecoinnovation, subsequently a knowledge augmented production function is estimated to assess the impact of eco-innovation on firm performance.Findings - Our findings suggest that regulation and customer perception can explain a firm s decision to engage in eco-innovation. Eco-innovation is also found to be more important than non-eco-innovation in determining firm performance.Research limitations/implications - Due to the limited availability of accounting data thispaper uses turnover per worker as the measure of firm performance. As a result, it is not possible to assess the impact of eco-innovation on firm costs.Social implications - The finding that regulation drives eco-innovation, and that there is no trade-off between eco-innovation and higher profit margins for innovating firms, suggests that regulators and policy makers can stimulate growth and create a greener society.Originality/value - This paper provides an empirical analysis of the Porter and van derLinde s (1995) theory of environmental regulation and firm performance using novel realworld data from over 2,000 Irish businesses.
Eco-innovation , Environmental regulation , Firm performance , Ireland , Non Eco-innovation , Government regulation
Justin Doran, Geraldine Ryan, (2012),"Regulation and firm perception, eco-innovation and firm performance", European Journal of Innovation Management, Vol. 15 Iss: 4 pp. 421 - 441
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