Revisiting the Porter Hypothesis: an emperical analysis of green innovation for the Netherlands

Using a comprehensive unbalanced panel of firm-level data constructed from four surveys we test within a structural model what is known in the literature as the “weak” and the “strong” version of the Porter hypothesis.Our “Green Innovation” model includes three types of eco investments and non-eco R&D to explain differences in the incidence of innovation. We aim to estimate the relative importance of energy price incentives as a market based type of ER and the direct effect of environmental regulation on eco investment and firms’ decisions regarding the introduction of several types of innovations. We explicitly model the potential synergies of introducing the three types of innovations simultaneously and their synergy in affecting total factor productivity (TFP) performance. The results of our analysis show a strong corroboration of the weak version of the Porter hypothesis but not of the strong version of the PH, in this case on TFP performance.