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Stewart Elgie and Mark Cohen - The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness? June 2010
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Stewart Elgie and Mark Cohen - The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness? June 2010

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Stewart Elgie and Mark Cohen Welcoming Address

Stewart Elgie and Mark Cohen Welcoming Address

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  • NOTE: There are so many papers & authors (many of whom are in this room – including ourselves) - - so we are not going to attempt to identify any of them. The Chairs Paper contains many of these citations - - and you are encouraged to suggest additions as we edit the chairs paper and find a suitable publication home.
  • Note: Weak Version versus “Strong Version”
  • NOTE: Stefan will address the criticisms in his discussion of Theory
  • Note two things: The findings on business performance did not separate out based on type of instrument used The findings on business performance did not look at a time lag to allow for innovation to occur and affect production (some studies find this important)
  • NOTE:

Transcript

  • 1. The Porter Hypothesis at 20: Overview of the Literature
    • Stefan Ambec
    • Toulouse School of Economics & Univ. Gothenberg
    • Mark A. Cohen
    • RFF & Vanderbilt Univ.
    • Stewart Elgie
    • Sustainable Prosperity & Univ. of Ottawa
    • Paul Lanoie
    • HEC Montreal
  • 2. Outline
    • What the Porter Hypothesis Does and Does Not Say
    • Developments in Theory
    • The Empirical Evidence
    • Design of Policies to Enhance Competitiveness
    • The Forward Research Agenda
  • 3. What is the Porter Hypothesis? Strict but Flexible Environmental Regulations (market-based) Innovation Business Performance (sometimes) Environmental Performance
  • 4. Why “properly crafted” regulation might lead to + outcomes…
    • Signal to companies about resource inefficiencies & potential technological improvements
    • Raise corporate awareness on topics that might otherwise be ‘lost’ in shuffle
    • Reduce uncertainty of investments in environmental protection
    • Creates pressures that motivate innovation and progress
    • Levels the transitional playing field
  • 5. Two Important Notes…
    • Criticism of Porter Hypothesis
    • Assumes firms aren’t always profit maximizing.
    • If there is low hanging fruit, why don’t firms know about it?
    • What Porter did NOT Say…
    • Did not say “all regulation leads to innovation…”
      • => Only that “well designed regulation does…”
    • Did not say, “innovation always offsets cost of regulation”
      • => He did say that it “often does…”
  • 6. Developments in Theory
    • Firms do not profit maximize
      • Risk averse managers
      • Bounded rationality
      • Present-biased decision makers
      • Information Asymmetry : owner versus manager
    • Market Failure
      • Imperfect competition
      • R&D spillovers
  • 7. Empirical Evidence
    • Weak Version => Regulation-Innovation
      • Patents
      • R&D investment, technological choice, age of assets
      • Yes, generally positive and significant , but often weak
  • 8. Empirical Evidence
      • 2. Strong Version => Firm Productivity
      • Cost functions, factor productivity, profits, ROI, Tobin’s Q
      • Plant location/pollution haven hypothesis
      • Mixed negative and positive results, usually weak.
  • 9. A sample study from OECD survey on 4000 production plants Environmental Policy Environmental R&D Environmental Performance Business Performance (-) (+) (+) (+)
  • 10. Policies to Enhance Competitiveness
    • Environmental Policies
      • Performance-based standards
      • Market-based instruments
      • - Questions about revenue recycling
    • 2. Industrial & Patent Policies
      • Patent policy might enhance R&D
  • 11. Policies to Enhance Competitiveness
    • 3. Training
        • Especially in SME & developing countries
    • 4. Organizational & Governance Conditions
          • Is this solely purview of private companies?
          • Transparency: CDP, GRI
          • Makeup & Role of Board of Directors
  • 12. Research Agenda Going Forward
    • First and Foremost:
    • Are the Policy Implications Empirically-based?
    • Areas we’ve tentatively identified:
      • Data & Methodological Issues
      • Non-Regulatory Policies
      • Longitudinal Studies
      • Global Studies
  • 13. Research Agenda Going Forward
    • Data & Methodological Issues
      • Proxies instead of actual measures of innovation, productivity, competitiveness
      • Lack of comparable industries, time, variables
    • How do Non-regulatory Policies Interact?
      • Voluntary programs
      • Mandatory Disclosure programs
  • 14. Research Agenda Going Forward
    • Longitudinal Studies
      • Only a few studies have even lagged key variables
      • Has the world changed?
    • Global Studies
      • Pollution haven hypothesis studies have not distinguished type of regulation
      • More comparable data opens opportunities for research
  • 15. Goal of Today’s Workshop
    • Assess What is Known
    • => Innovation
    • => Competitiveness
    • => What are key policy implications?
    • Assess What is NOT Known
    • => Prioritize main research questions
  • 16.
      • Questions?