Does innovative capability enhance the energy efficiency of Indian Iron and Steel firms? A Bayesian stochastic frontier analysis

Abstract

Abstract This paper aims to estimate energy efficiency and quantify the energy-saving potential of Indian iron and steel firms. Further, we explore the influence of different innovative capability channels that can enhance energy efficiency. Firm-level data of 82 Indian iron and steel firms over the period of 2003–2017 has been taken to investigate the issues. Bayesian stochastic frontier analysis (SFA) has been adopted to measure underlying energy efficiency. The results show that most of the firms can reduce half of their energy consumption, while substantial heterogeneity exists in terms of energy efficiency. The Bayesian SFA outperforms classical SFA and documents slightly declining evidence of energy efficiency over time. The analysis also depicts that investing in R&D expenditure, patenting activity, and disembodied technology flow enables firms to achieve higher stage energy efficiency. ISO 14001 certified firms do not perform better than non-certified firms, and there is no significant effect of embodied technology on the firms' energy efficiency.