We investigate the productivity effects of eco-innovations at the firm level using a modified version of the CDM model (Crepon et al., 1998).
The distinctive nature of environmental innovations, especially as regards the need for government intervention to create market opportunities, is likely to affect the way they are pursued and their effect on productivity.
The analysis is based on an unbalanced panel sample of Italian manufacturing firms merged with data on patent applications and balance sheet information. When looking at innovation’s return on productivity , we observe that eco-innovations exhibit a generally lower return relative to other innovations, at least in the short run.
This differential effect is more pronounced for polluting firms, which are likely to face higher compliance costs for environmental regulations than other firms. This result holds for both the extensive (probability of patenting) and intensive (patent count) margin.