Eco-Innovation – Does Additional Engagement Lead to Additional Rewards?

Doran, Justin and Ryan, Geraldine (2014): Eco-Innovation – Does Additional Engagement Lead to Additional Rewards? Forthcoming in: International Journal of Social Economics

Abstract

Purpose Eco-innovation is any form of product, process or organisational innovation that contributes towards sustainable development. Firms can eco-innovate in a variety of ways. In this paper we identify nine different eco-innovation activities - including such items as reducing material use per unit of output, reducing energy use per unit of output, reducing CO2 'footprint' - and we ask whether these act as substitutes or complements to one another.

Design/ Methodology/ Approach Using data for over 2,000 Irish firms collected in a special module included in the sixth Community Innovation Survey we test whether the introduction of two eco-innovation activities over a short period of time provide a greater (lesser) benefit to the firm, in terms of turnover, than the introduction of these eco-innovations individually.

Findings Introducing only one eco-innovation activity has little payoff (in terms of turnover per worker) with only those firms who reduce their CO2 'footprint' having higher levels of turnover per worker. When introducing more than one eco-innovation activity we find that certain eco-innovation activities complement one another (e.g. reducing material use within the firm at the same time as improving the ability to recycle the product after use) others act as substitutes (e.g. reducing material use within the firm at the same time as recycling waste, water, or materials within the firm).

Practical Implications Our results suggest that firms can maximise their productive capacity by considering specific combinations of eco-innovation. This suggests that firms should plan to introduce eco-innovation which act as complements, thereby, boosting productivity. It also suggests that eco-innovation stimuli, introduced by policy makers, should be targeted at complementary eco-innovations.

Originality We analyse whether eco-innovations act as complements or substitutes. While a number of studies have analysed the importance of eco-innovation for firm performance, few have assessed the extent to which diverse types of eco-innovation interact with each other to complement or substitute one another.

• Item Type: MPRA Paper
• Language: English
• Keywords: Eco-Innovation, Complementarity, Innovation, Ireland, CIS
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O30 - General; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O31 - Innovation and Invention: Processes and Incentives; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q50 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q5 - Environmental Economics > Q55 - Technological Innovation

References

[1] Barsoumian, S., A. Severin and T. Van der Spek (2011). "Eco‐innovation and National Cluster Policies in Europe, A Qualitative Review". Report by Greenovate, Vol. No., pp. 1-95.

[2] Baumol, W. J. (2002). The free-market innovation machine: Analyzing the growth miracle of capitalism.Princeton Univ Pr.

[3] Björklund, A. and G. Finnveden (2005). "Recycling revisited—life cycle comparisons of global warming impact and total energy use of waste management strategies". Resources, Conservation and Recycling, Vol. 44, No. 4, pp. 309-317.

[4] Cainelli, G., M. Mazzanti and R. Zoboli (2011). "Environmental innovations, complementarity and local/global cooperation: evidence from North-East Italian industry". International Journal of Technology, Policy and Management, Vol. 11, No. 3, pp. 328-368.

[5] Crépon, B., E. Duguest and J. Mairesse (1998). "Research, Innovation and Productivity: An Econometric Analysis at the Firm Level". Economics of Innovation and New Technology, Vol. 7, No. 2, pp. 115-158.

[6] Crowley, K. (1999). "Jobs and environment: the "double dividend'' of ecological modernisation?". International Journal of Social Economics, Vol. 26, No. 7/8/9, pp. 1013 - 1026.

[7] Desrochers, P. (2008). "Did the invisible hand need a regulatory glove to develop a green thumb? Some historical perspective on market incentives, win-win innovations and the Porter hypothesis". Environmental and Resource Economics, Vol. 41, No. 4, pp. 519-539.

[8] Doran, J. and E. O’Leary (2011). "External Interaction, Innovation and Productivity: An Application of the Innovation Value Chain for Ireland". Spatial Economic Analysis, Vol. 6, No. 2, pp. 199 - 222.

[9] Doran, J. and G. Ryan (2012). "Regulation and Firm Perception, Eco-Innovation and Firm Performance". European Journal of Innovation Management, Vol. 15, No. 4, pp. 421 - 441.

[10] Eco-Innovation Observatory (2012). Closing the Eco-Innovation Gap, An Economic Opportunity for Business, European Commission.

[11] Eurobarometer, F. (2011). "Attitudes of European entrepreneurs towards eco-innovation". Vol. No., pp.

[12] European Commission. (2011). "Eco-innovation Action Plan Launched: helping business to deliver green growth and environmental benefits.", from http://eeas.europa.eu/delegations/malaysia/documents/press_corner/all_news/2011/20111220_eumsiagreentech_en.pdf.

[13] European Commission (2013). The Opportunities to Business of Improving Resource Efficiency, AMEC Environment & Infrastructure and Bio Intelligence Service.

[14] Freeman, C. and L. Soete (1997). The Economics of Industrial Innovation.Pinter, London.

[15] Gliedt, T. and P. Parker (2007). "Green community entrepreneurship: creative destruction in the social economy". International Journal of Social Economics, Vol. 34, No. 8, pp. 538-553.

[16] Greenovate (2012). Guide to Resource Efficiency in Manufacturing; Experiences from Improving Resource Efficiency in manufacturing Companies. Europe Innova, REMake.

[17] Griffith, R., E. Huergo, J. Mairesse and B. Peters (2006). "Innovation and Productivity Across Four European Countries". Oxford Review of Economic Policy, Vol. 22, No. 4, pp. 483-498.

[18] Griliches, Z. (1979). "Issues in Assessing the Contribution of Research and Development to Productivity Growth". Bell Journal of Economics, Vol. 10, No. 1, pp. 92-116.

[19] Guagnano, G. A. (2001). "Altruism and market-like behavior: An analysis of willingness to pay for recycled paper products". Population & Environment, Vol. 22, No. 4, pp. 425-438.

[20] Hall, B., F. Lotti and J. Mairesse (2009). " Innovation and Productivity in SMEs: Empirical Evidence from Italy". Small Business Economics, Vol. 33, No. 1, pp. 13-33.

[21] Hemmelskamp, J. (1997). "Environmental Policy Instruments and their Effects on Innovation". European Planning Studies, Vol. 5, No. 2, pp. 177 - 194.

[22] Hemmelskamp, J. and F. E. E. Mattei (1999). The Influence of Environmental Policy on Innovative Behaviour: An Econometric Study.Fondazione Eni Enrico Mattei.

[23] Horbach, J. (2008). "Determinants of Environmental Innovation - New Evidence from German Panel Data Sources". Research Policy, Vol. 37, No. 1, pp. 163 - 173.

[24] Horbach, J., C. Rammer and K. Rennings (2011). Determinants of Eco-innovations by Type of Environmental Impact The Role of Regulatory Push/Pull, Technology Push and Market Pull.ZEW, Zentrum für Europäische Wirtschaftsforschung.

[25] Horbach, J. and K. Rennings (2007). "Panel-Survey Analysis of Eco-Innovation: Possibilities and Propositions". Vol. No., pp.

[26] Horte, S. A. and F. Halila (2008). "Success factors for eco-innovations and other innovations". International Journal of Innovation and Sustainable Development, Vol. 3, No. 3, pp. 301-327.

[27] Hou, J. and P. Mohnen (2011). "Complementarity between in‐house R&D and technology purchasing: evidence from Chinese manufacturing firms". UNU-MERIT Working Paper Series, Vol. 048, No., pp.

[28] Kammerer, D. (2009). "The Effects of Customer Benefit and Regulation on Environmental Product Innovation: Empirical Ecidence from Appliance Manufacturers in Germany". Ecological Economics, Vol. 68, No. 8-9, pp. 2285 - 2295.

[29] Kemp, R. (2000). "Technology and Environmental Policy—Innovation effects of past policies and suggestions for improvement". Innovation and the Environment, Vol. No., pp. 35-61.

[30] Kemp, R. and T. Foxon (2007). "Eco-innovation from an innovation dynamics perspective". MEI project, UNU-MERIT, Vol. No., pp.

[31] Kemp, R. and V. Oltra (2011). "Research Insights and Challenges on Eco-Innovation Dynamics". Industry and Innovation, Vol. 18, No. 03, pp. 249-253.

[32] Kesidou, E. and P. Demirel (2012). "On the drivers of eco-innovations: Empirical evidence from the UK". Research Policy, Vol. No., pp.

[33] Klomp, L. and G. Van Leeuwen (2001). "Linking Innovation and Firm Performance: A New Approach". International Journal of the Economics of Business, Vol. 8, No. 3, pp. 343-364.

[34] Klomp, L. and G. Van Leeuwen (2006). "On the Contribution of Innovation to Multi-Factor Productivity Growth". Economics of Innovation and New Technology, Vol. 15, No. 4, pp. 367-390.

[35] Kraft, K. (1990). "Are Product- and Process-Innovations Independent of Each Other?". Applied Economics, Vol. 22, No. 8, pp. 1029 - 1038.

[36] Lööf, H. and A. Heshmati (2002). "Knowledge Capital and Performance Heterogeneity: A firm Level Innovation Study". International Journal of Production Economics, Vol. 76, No. 1, pp. 61-85.

[37] Lööf, H. and A. Heshmati (2006). "On the Relationship between Innovation and Performance: A Sensitivity Analysis". Economics of Innovation and New Technology, Vol. 15, No. 4, pp. 317-344.

[38] Love, J. and M. Mansury (2007). "External Linkages, R&D and Innovation Performance in US Business Services". Industry and Innovation, Vol. 14, No. 5, pp. 477-496.

[39] Manget, J., C. Roche and F. Münnich (2009). "For real, not just for show". Sloan Management Review, Vol. No., pp.

[40] Mansury, M. and J. Love (2008). "Innovation, Productivity and Growth in US Business Services: A Firm Level Analysis". Technovation, Vol. 28, No. 1-2, pp. 52-62.

[41] Martinez-Ros, E. (2000). "Explaining the Decisions to Carry out Product and Process Innovations: The Spanish Case". The Journal of High Technology Management Research, Vol. 10, No. 2, pp. 223-242.

[42] Martinez-Ros, E. and J. Labeaga (2009). "Product and Process Innovation: Persistence and Complementarities". European Managment Review, Vol. 6, No. 1, pp. 64 - 75.

[43] Milgrom, P. and J. Roberts (1990). "The Economics of Modern Manufacturing: Technology, Strategy, and Organization". American Economic Review, Vol. 80, No. 3, pp. 511 - 528.

[44] Miravete, E. and J. Pernías (2006). "Innovation Complementarity and Scale of Production". The Journal of Industrial Economics, Vol. 54, No. 1, pp. 1 - 29.

[45] Mohnen, P. and L. Roller (2005). "Complementarity in Innovation Policy". European Economic Review, Vol. 49, No. 6, pp. 1431 - 1450.

[46] Montalvo, C., F. J. Díaz López and F. Brandes (2011). "Potential for eco-innovation in nine sectors of the European economy". Vol. No., pp.

[47] OECD (2005). The Measurement of Scientific and Technological Activities Oslo Manual: Guidelines for Collecting and Interpreting Innovation Data.OECD publishing, Luxembourg.

[48] Palmer, K., W. E. Oates and P. R. Portney (1995). "Tightening environmental standards: The benefit-cost or the no-cost paradigm?". The Journal of Economic Perspectives, Vol. 9, No. 4, pp. 119-132.

[49] Percival, J. and B. Cozzarin (2008). "Complementarities affecting the Returns to Innovation". Industry and Innovation, Vol. 15, No. 4, pp. 371 - 392.

[50] Porter, M. and C. van der Linde (1995). "Toward a New Conception of the Environment-Competitiveness Relationship". The Journal of Economic Perspectives, Vol. 9, No. 4, pp. 97 - 118.

[51] Rassier, D. G. and D. Earnhart (2010). "Does the Porter hypothesis explain expected future financial performance? the effect of clean water regulation on chemical manufacturing firms". Environmental and Resource Economics, Vol. 45, No. 3, pp. 353-377.

[52] Rehfeld, K. M., K. Rennings and A. Ziegler (2007). "Integrated product policy and environmental product innovations: An empirical analysis". Ecological Economics, Vol. 61, No. 1, pp. 91-100.

[53] REMake. (2013). "Welcome to ecomanufacturing.eu Recycling and resource efficiency in manufacturing." Retrieved 17 July 2013, from http://www.ecomanufacturing.eu/.

[54] Roper, S. (2001). "Innovation, Networks and Plant Location: some evidence from Ireland". Regional Studies, Vol. 35, No. 3, pp. 215-228.

[55] Roper, S., J. Du and J. Love (2008). "Modeling the innovation value chain". Research Policy, Vol. 37, No. 6-7, pp. 961-977.

[56] Roper, S., J. Youtie, P. Shapira and A. Fernández-Ribas (2010). "Knowledge, Capabilities and Manufacturing Innovation: A USA-Europe Comparison". Regional Studies, Vol. 44, No. 3, pp. 253 - 279.

[57] Saxena, R. P. and P. K. Khandelwal (2012). "Greening of industries for sustainable growth: An exploratory study on durable, non-durable and services industries". International Journal of Social Economics, Vol. 39, No. 8, pp. 551-586.

[58] Schmiedeberg, C. (2008). "Complementarities of innovation activities: An empirical analysis of the German manufacturing sector". Research Policy, Vol. 37, No., pp. 1492 - 1503.

[59] Schumpeter, J. (1975). Capitalism, Socialism and Democracy.Harper and Row, New York.

[60] Soares, M. (2012). "Framework for sustainable and responsible innovation." Speech at ENERO Workshop 20th Anniversary 'Boosting and securing eco-innovations through new partnerships' Retrieved 24 July 2012, from http://www.enero.eu/files/files/ECOINOVATION_WS_2012/2_ENERO_workshop_speech_M_Soares_29.3.12.pdf.

[61] Swann, P. (2009). The Economics of Innovation: An Introduction.Edward Elgar, Cheltenham, UK.

[62] Tohidi, H. and M. M. Jabbari (2012). "The important of Innovation and its Crucial Role in Growth, Survival and Success of Organizations". Procedia Technology, Vol. 1, No., pp. 535-538.

[63] Triebswetter, U. and J. Wackerbauer (2008). "Integrated environmental product innovation in the region of Munich and its impact on company competitiveness". Journal of Cleaner Production, Vol. 16, No. 14, pp. 1484-1493.

[64] Van de Ven, A. H. (1999). The innovation journey.Oxford University Press, USA.

[65] Wagner, M. (2007). "On the relationship between environmental management, environmental innovation and patenting: Evidence from German manufacturing firms". Research Policy, Vol. 36, No. 10, pp. 1587-1602.