Economic complexity, property rights and the judicial system as drivers of eco-innovations: An analysis of OECD countries

Abstract

Rising global temperatures and the increase in natural disasters in recent years have raised concerns regarding the sustainability of economic activity. In this context, eco-innovation has become increasingly important. Nevertheless, countries are heterogeneous in terms of their eco-innovation production. Our study contributes to the understanding of the drivers of eco-innovation by analyzing the determinants of green patent production at the country level. We focus on the specific characteristics of green innovations, namely their complexity and appropriability problem, and explain how these characteristics affect firms’ incentives to produce green innovations. We then select three external dimensions related to these characteristics and examine how they affect the number of green patents produced. These three dimensions are economic complexity, protection of property rights, and effectiveness of the judicial system. Using the Furman et al. (2001) model as a starting point, this study focuses on green patent production in OECD countries for the period 2007–2016. The results show that economic complexity and intellectual property rights are key determinants of green patent production.