There are different shades of green: heterogeneous environmental innovations and their effects on firm performance

Abstract

While an established literature highlights the variety of firms' eco-innovation strategies, systematic evidence on the heterogeneous effects of different environmental innovations on different dimensions of firm performance is lacking. This study contributes to filling this research gap by estimating the effect of three eco-innovation strategies (resource-saving, pollution-reducing and regulation-driven) on three dimensions of performance (sales growth, employment growth and productivity). Exploiting the Spanish Technological Innovation Panel over the period 2003-2016 and the IPWRA estimator suitable for identification of causal effects, we document heterogeneous effects across eco-innovations and firm performances. Results show that pollution-reducing and regulation-driven eco-innovations foster employment growth, and both resource-saving and pollution-reducing eco-innovations generate sizable productivity gains. Regarding sales growth, there is evidence of a positive effect of regulation-driven innovation, a weaker positive effect for resource-saving innovation, and no significant effect for pollution-reducing innovation.