Can Environmental Regulation Drive the Environmental Technology Diffusion and Enhance Firms’ Environmental Performance in Developing Countries? Case of Olive Oil Industry in Morocco

Abstract

Literature on the drivers of environmental technology has been increasing in recent years. However, few studies analyze the issue in developing countries. The main goals of understanding the drivers of, and obstacles to the ecological decisions made by firms, are to design efficient environmental regulatory instruments to achieve the environmental targets. This article analyzes the determinants, including the effects of environmental regulations, of the environmental technology adoption and improvement of environmental performance in the olive oil industry in managing the olive mills wastewater (OMWW). To meet our research objective, we applied a two-stage Heckman probit model to the data collected from 156 olive oil producers in three Moroccan provinces known by a high concentration of olive oil production activity. Our results showed that the environmental regulation is one main determinant of the adoption of environmental technology by olive oil producers. However, our findings indicate that the environmental regulation, as currently designed, is not strict enough to encourage producers to improve their environmental performance in the developmental context of this particular country. The conclusions of this research also suggest that the environmental performance of oil mills, while not explained by the severity of the environmental regulation, are influenced by other external and internal factors. On the one hand, the influence of the external environment of firms via the effect of external collaboration and international market orientation, and, on the other hand by internal factors related to environmental awareness of the producer and the firm’s technical competency. In the light of our findings, we recommend to the policy makers to carry out a reform of the regulatory measures through: (i) the implementation of the current legislation, (ii) designing an effective incentive system, combining better targeted green subsidy with an optimal tax on industrial wastewater discharge (iii) setting up programs to raise awareness and reinforce technical capacities.