Drivers of environmental innovation - Vinnova

average productivity increases. This is in line with the hypothesis. However,
the authors are interested in the development of net profits and come to the
conclusion that the trade-off between environmental conditions and profits of
the home industry remains opposed to the hypothesis. But the trade-off is less
sharp because of industry downsizing and modernisation (Xepapadeas and de
Zeeuw, 1999).
Defence arguments
Porter and van der Linde themselves answer some of the critics of the earlier
argument, that strict environmental regulation can be fully consistent with
competitiveness, in their article from 1995. One criticism was that while
innovation offsets are theoretically possible, they are likely to be rare or small in
practice. Porter and van der Linde disagree and argue that fundamentally
pollution is a manifestation of economic waste and involves unnecessary,
inefficient or incomplete utilisation of resources, or resources that are not used
to generate their highest value. In many cases, emissions are a sign of
inefficiency and force a firm to perform non-value-creating activities such as
handling, storage and disposal. Along the life cycle of the product there are
many hidden costs of resource inefficiency. They point to efforts to reduce
pollution and maximise profits share the same basic principles, including the
efficient use of inputs, substitute of less expensive materials and the
minimisation of unneeded activities (Porter and van der Linde, 1995).
Another criticism of the hypothesis was, according to Porter and van der Linde,
that the studies interpret the high costs of compliance with environmental
regulations, as evidence that there is a fixed trade-off between regulation and
competitiveness. Porter and van der Linde answer that estimates of regulatory
compliance costs prior to enactment of a new rule typically exceed the actual
costs. Also early estimates of compliance cost tend to be exaggerated because
they assume no innovation. A third criticism was that even if regulation fosters
innovation, it will harm competitiveness by crowding out other potentially
more productive investments. The authors write that many firms have, given
incomplete information, devoted limited attention to environmental
innovations and the inherent linkage between pollution and resource
productivity. It is, therefore, certainly not obvious that this line of innovation
has been so thoroughly explored that the marginal benefits of further
investment would be low (Porter and van der Linde, 1995).
Comments
The conclusion made by Marklund, that Porter’s ideas must be tested within
frames of reference other than the ones usually used by economists illustrates
the difficulties of studying innovations within standard economics frameworks.
Investing in innovations differs from routine investments in a number of ways.
Routine investments are made to increase or change production in a foreseeable
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