Impact of e-waste regulations on firms' R&D and marketing expenditures: Insights for a circular economy

Abstract

Shorter product lifecycles and rising consumer demand drive the rapid expansion of electronic garbage, or e-waste, presenting environmental and public health issues. Governments worldwide have implemented e-waste recycling regulations to control the collection, recycling, and disposal of electronic trash. These regulations are intended to reduce harmful pollution, preserve resources, and promote a circular economy. However, firms associated with the electronic products industry have to limit the resource allocation on long-term strategies due to compliance with these e-waste regulations. We investigate the impact of e-waste regulations on the R&D and marketing expenditures of firms producing or selling electronic products. Using Standard Industrial Classification codes to identify industries linked to electronic equipment, this study examines the effects of state-level e-waste legislation in the U.S. on business practices, with a particular emphasis on R&D and marketing expenditures. We examine changes in businesses impacted by e-waste regulations compared to those in states with no regulations, using a difference-in-differences methodology using a 30-year dataset (1993–2023). The results highlight trade-offs between satisfying regulatory requirements and promoting innovation, showing that e-waste regulations result in lower R&D and marketing expenditures. These findings are validated by robustness testing that uses bootstrapping and extended DID. Our research has several theoretical and practical recommendations.