The Porter Hypothesis at 20: How Can EnvironmentalThe Porter Hypothesis at 20: How Can Environmental Regulation Enhance Innovation and Competitiveness?

Montreal, 28 June 2010

Regulation & Innovation:The Perspective ofThe Perspective of Innovation Economics

Prof. Dr. Marcus Wagner

Chair in Entrepreneurship and Corporate Growth U i it f W b & BETA St bUU

wwUniversity of Wuerzburg & BETA StrasbourgggUU

ggUUwwImplications of Stylized Facts in Innovation Economicsgg

Stylized facts: Stylized facts:– Product versus process innovation (role of dominant design)

I t l di l i ( / ll l fi )– Incremental vs. radical innov. (young/small vs. large firms)– Integrated vs. end-of-pipe environmental innovation

(How) does the effect of regulation on these types of innov. diff ? H t bl h t d i i t t d i ?differ? How traceable when trend is integrated innov.?

Empirically, environmental reg. has stronger positive effects on environmental technology (trade) than technology overall (comp. more strongly improved for env. than other sectors)

Env Reg Env InnoNeed for an entrepreneurship lens

Prof. Dr. Marcus Wagner, University of Wuerzburg

Env. Reg. Env. Inno.Other reg. Other Inno.

ggUUwwTechnical Aspects to Analysing the Porter Hypothesis gg

Taxes subsidies trading systems are environmental policy Taxes, subsidies, trading systems are environmental policyinstruments, but some difference to command/control, e.g.: where is the stringency aspect? See German feed in law:where is the stringency aspect? See German feed-in law:

P li t i iti ti ( ) i ifi tl f t d diff i Parliamentary initiative (rare), significantly fostered diffusionof renewable energy, but mainly indirect innovation effects( i /l i i d li d i i )(experience curve/learning, price declined, competitiveness)

Reg. less linked to innov./patents; stronger effect of reg. on diffusion: R&D often before reg. is enforced (co-evolution?)

How to measure innov.? Env. patents difficult to define (IPC p (classes, keywords): more so with integrated technology

Prof. Dr. Marcus Wagner, University of Wuerzburg

ggUUwwInnovation Restrictions under Regulation: A Model gg

Competitiveness

Competitiveness

Legal minimum level of performance required by environmental or social regulation (weak or strong)

Optimum with weak

strictweak

Optimum

non-linear relationship

g ( g)

Optimum with weak or strong regulationregulation

pwith strict regulation

Environmental/

linear relationship

relationship

Environmental/Social Regulation/Social Regulation/

Performance

Social Regulation/PerformanceLegal minimum of performance

Traditional relationship between environmental/social regulation/performance and competitiveness

Revised relationship between environmental/social regulation/performance and competitiveness

Level of regulation is … “Traditional”-type link (left) “Revised”-type link (right)

… strict Optimal choice: be compliant Optimal choice: be compliant

… weak Optimal choice: be compliant Optimal choice: be over-p p pcompliant

Prof. Dr. Marcus Wagner, University of Wuerzburg

ggUUww

Future Empirical Research: A Mixed Method Proposal gg

Survey of 342/169 firms and exploratory interviewsPanel study: 2001 (env inno ) 2006 (regulation) 2011 (financials panel methods)

Sample(Wagner, 2008, Ecological

Innovation - Types/drivers

Regulation- REACH

Competitiveness: 4 dimensions: pro-

Firm data- Size, strategy

Panel study: 2001 (env. inno.), 2006 (regulation), 2011 (financials, panel methods)

Ecological Economics) - Open? User?

- Level of inno.- EU-ETS- .. 4 more ..

ductivity, markets, stakeholders, risk

- Industry, age- …

Augmented n=56 patent data 1998 2005 n=54 in depth case studiesAugmentedsubsamplesderived

n=56, patent data 1998-2005 (Method: Wagner, 2007, Research Policy)

n=54, in-depth case studies(detailed innovation-specific data)

Data added green/total patents Type of innovation offset, …Preliminaryresults of analysis

- stable strategy focus 98-05 but for cost leadership: quality(incl env perf ) increas relevanalysis (incl. env. perf.) increas. relev.

- patents not assoc. with maindriver (technol., markets, reg.)

d l l f i- occurence and level of innov.depend on specific regulation(sig. effect of reg. on inno. forREACH, EU Noise Directive; for latter less radical innov.)

Prof. Dr. Marcus Wagner, University of Wuerzburg

ggUUwwSome Conclusions and Alleys for Future Research gg

Explore more links Explore more links – to supply/value chain perspectives (extended version of PH),

t i t t d li f k (D t h t iti t) d– to integrated policy frameworks (Dutch transition management) and– to literature bodies in innov. economics (national innovation systems)

Arrow‘s distinction of rate and direction of technical change: d ff t b th (?) i il l (?) i (?)does reg. affect both (?) similarly (?) in same way (?)

Identify mechanisms that bring about inno. offsets, e.g. incentive systems, information systems, product/corporatestrategies, esp. those implying beyond compliance/voluntaryaction: when does innovation enable competitiveness fromregulation and when other mechanisms and which ones?

Prof. Dr. Marcus Wagner, University of Wuerzburg