Page 25 - Hojnik, Jana. 2017. In Persuit of Eco-innovation. Drivers and Consequences of Eco-innovation at Firm Level. Koper: University of Primorska Press
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Eco-innovation 25
ket pull factors induce environmentally friendly products or image (Ren-
nings 2000). Hence, due to the externality problem regarding eco-in-
novation, the determinants of eco-innovation should also include the
regulatory framework (the regulatory push/pull effect), because the reg-
ulatory framework and environmental policy both strongly affect eco-in-
novation (Rennings 2000). Therefore, neoclassical environmental eco-
nomics considers environmental regulation to remedy a market failure
through the internalization of costs that occur from the negative exter-
nalities (Testa et al. 2011). While environmental regulation corrects the
negative externalities, it also burdens companies with additional costs de-
riving from increased expenditures in environmental protection in order
to comply with regulations (Testa et al. 2011). Higher production costs
lead to a lower competitiveness of companies’ products on the domestic
and foreign markets (Testa et al. 2011). In contrast, the second stream ar-
gued that environmental regulation could be beneficial. The Porter hy-
pothesis suggests that environmental regulation stimulates innovation
(Testa et al. 2011) by providing incentives that affect companies’ pro-
duction routines in a way that ensures compliance and leads to cost re-
ductions (through decrease of resource inputs or increased efficiency) or
even to new marketable products that entirely offset the costs of compli-
ance (Testa et al. 2011). Thereby, environmental innovation represents a
source of comparative advantages (Costantini and Crespi 2008). Ford et
al. (2014) found some support for the original version of the Porter hy-
pothesis, which claims that regulation spurs innovation. Additionally,
Jaffe and Palmer (1997) differentiated the Porter hypothesis into “weak”,
“narrow” and “strong” versions, with the results of their study confirm-
ing the “weak” version. The “narrow” version claims that a certain type of
regulation motivates innovation (Jaffe and Palmer 1997), the “weak” ver-
sion posits that only regulation will induce certain types of innovation,
and the “strong” version postulates that properly designed regulation in-
duces innovation and more than offsets the costs of compliance (i.e., leads
to compliance with regulation and increased profits) (Jaffe and Palmer
1997). Furthermore, other researchers (Mazzanti and Costantini 2010)
found support for the weak and the strong Porter hypothesis on export
performance, while Lanoie et al. (2011), based on seven OECD countries,
found strong support for the weak version, found qualified support for
the narrow version and rejected the strong version (no support found).
Regarding the strong version of the Porter hypothesis, Mazzanti and
Costantini (2010) found that the overall impact of environmental pol-
icies is not in conflict with export competitiveness. For the weak version
ket pull factors induce environmentally friendly products or image (Ren-
nings 2000). Hence, due to the externality problem regarding eco-in-
novation, the determinants of eco-innovation should also include the
regulatory framework (the regulatory push/pull effect), because the reg-
ulatory framework and environmental policy both strongly affect eco-in-
novation (Rennings 2000). Therefore, neoclassical environmental eco-
nomics considers environmental regulation to remedy a market failure
through the internalization of costs that occur from the negative exter-
nalities (Testa et al. 2011). While environmental regulation corrects the
negative externalities, it also burdens companies with additional costs de-
riving from increased expenditures in environmental protection in order
to comply with regulations (Testa et al. 2011). Higher production costs
lead to a lower competitiveness of companies’ products on the domestic
and foreign markets (Testa et al. 2011). In contrast, the second stream ar-
gued that environmental regulation could be beneficial. The Porter hy-
pothesis suggests that environmental regulation stimulates innovation
(Testa et al. 2011) by providing incentives that affect companies’ pro-
duction routines in a way that ensures compliance and leads to cost re-
ductions (through decrease of resource inputs or increased efficiency) or
even to new marketable products that entirely offset the costs of compli-
ance (Testa et al. 2011). Thereby, environmental innovation represents a
source of comparative advantages (Costantini and Crespi 2008). Ford et
al. (2014) found some support for the original version of the Porter hy-
pothesis, which claims that regulation spurs innovation. Additionally,
Jaffe and Palmer (1997) differentiated the Porter hypothesis into “weak”,
“narrow” and “strong” versions, with the results of their study confirm-
ing the “weak” version. The “narrow” version claims that a certain type of
regulation motivates innovation (Jaffe and Palmer 1997), the “weak” ver-
sion posits that only regulation will induce certain types of innovation,
and the “strong” version postulates that properly designed regulation in-
duces innovation and more than offsets the costs of compliance (i.e., leads
to compliance with regulation and increased profits) (Jaffe and Palmer
1997). Furthermore, other researchers (Mazzanti and Costantini 2010)
found support for the weak and the strong Porter hypothesis on export
performance, while Lanoie et al. (2011), based on seven OECD countries,
found strong support for the weak version, found qualified support for
the narrow version and rejected the strong version (no support found).
Regarding the strong version of the Porter hypothesis, Mazzanti and
Costantini (2010) found that the overall impact of environmental pol-
icies is not in conflict with export competitiveness. For the weak version
