Stepping up to the Mark? Firms’ Export Activity and Environmental Innovation in 14 European Countries

Authors: Aoife Hanley, Finn Ole Semrau (Industry and Innovation, forthcoming)

We investigate the ability of exports to trigger the adoption of environmental innovation (EI) in firms, shedding light on the determinants of convergence in environmental standards for Europe’s catch-up economies. To analyse this question empirically, we measure the latter as the 1) probability a firm adopts EI and the 2) breadth of EI adoption in firms. Applying Logit and Poisson pseudo-maximum likelihood estimations to firm-level data for 14 European countries, we find that particularly Eastern European exporters report higher EI adoption propensities, an effect exclusively driven by process-based EI and not observable for product-based EI. Additionally, we reveal that regardless of a firm’s origin, exposure to importing countries with high market-related environmental policy stringency, is linked to the adoption of EI. We conclude that learning-by-exporting, regulation-push and demand-pull mechanisms may help to explain these findings, with foreign markets being characterised by a wider diversity of stakeholder preferences.

Keywords: Green-/eco-/environmental innovation, circular economy, environment and trade, export activity, green deal

JEL: F18, O31, Q52, Q56

DOI: https://doi.org/10.1080/13662716.2021.2021865