Scrutinizing the nexus between green innovations and the sustainability of environmental system: novel insights from European database

Abstract

A study is presented in this paper that examines the effect of environmental innovation (EI) on environmental performance (EP). Six measures are used to reflect environmental innovation, including the percentage of enterprises that invest in environmental innovation, the percentage of enterprises implementing environmental innovation activities, the number of ISO 14001 certificates, patents related to environmental innovation, the total R&D personnel and researchers, and the amount of green early-stage investments. The estimation results show that EI positively impacts EP in 21 European countries using different econometric techniques during the 2011-2019 period. By using various econometric techniques (namely a panel-corrected standard errors (PCSE) model, a feasible generalized least square estimates (FGLS) model, and the two-step general method of moment (the two-step GMM), our research demonstrates how environmental innovation impacts on environmental quality. The short- and long-term effects of autoregressive distributed lag (ARDL) methods were also investigated using pooled mean groups (PMGs) to distinguish the short-run and long-run influences of EI. The relationship between EI and EP is explored by demonstrating how EI affects EP short- and long-term and comparing its influence on EP across many component measures of EI: air quality, sanitation, drinking water, heavy metals, waste management, biodiversity, habitat, ecosystem services, water resources, and agriculture. Notably, we find that the influences of EI become more pronounced in a country characterized by a well-developed institutional system. Our findings suggest policy implications to help countries invest in research and development with concerns about environmental damage mitigations more effectively. These findings are critical to suggest a way to help countries pursue ecological sustainability.

Keywords: Environmental innovations; Environmental performance; Global sample; Linear effects; Short-term and long-term effects.