Green Innovations and Toxic Emissions of Manufacturing Firms: Do Green Innovative Firms Pollute Less?

The literature has shown that manufacturing firms that develop green innovations will benefit from important intangible assets such as improved organizational capabilities and market advantages. While these benefits are valuable, a more environmentally relevant and unanswered question is whether developing green innovations can also help the focal manufacturing firm reduce its own level of carbon and toxic emissions, or simply put, whether the green innovative firm pollutes less than other firms. To answer this question, the author used fixed-effects models and collected data on the green patents and emissions of 190 manufacturing firms over a period of 25 years. Findings reveal that developing green innovations leads to lower emissions levels for the innovating firm. Moreover, the impact of green innovations on emissions levels is stronger when the type of green innovation is process-oriented (vs. product-oriented) and when the manufacturing firm operates in countries with more stringent environmental regulations.