Public economics

Competitor analysis

Business

Compliance (psychology)

Environmental regulation

Macroeconomics

Marketing

Manufacturing

Political science

Econometrics

Management

Psychology

Economics

Control (management)

Porter hypothesis

Environmental compliance

Stylized fact

Industrial organization

Panel data

Social psychology

The Review of Economics and Statistics

In a 1991 essay in Scientific American, Michael Porter suggested that environmental regulation may have a positive effect on the performance of domestic firms relative to their foreign competitors by stimulating domestic innovation. We examine the stylized facts regarding environmental expenditures and innovation in a panel of manufacturing industries. We find that lagged environmental compliance expenditures have a significant positive effect on R&D expenditures when we control for unobserved industry-specific effects. We find little evidence, however, that industries' inventive output (as measured by successful patent applications) is related to compliance costs.

Environmental Regulation and Innovation: A Panel Data Study