GREEN MANAGEMENT AND THE NATURE OF TECHNICAL INNOVATION

Abstract

The types and nature of a firm’s innovative activities are influenced by a firm’s organizational structure. We develop an empirical framework to examine the effect of Total Quality Environmental Management (TQEM) on the adoption of 43 types of innovative pollution prevention activities over the period 1992-1996, and to determine whether it differs systematically across innovation types. We differentiate innovations according to (i) their functional characteristics: whether they involve procedural changes, equipment modifications, material modifications or other unclassified/customized changes; (ii) their visibility to consumers and, (iii) their ability to enhance efficiency. We find that the effect of TQEM on pollution prevention is non-uniform and stronger for the adoption of practices that involve procedural changes or have unclassified/customized attributes. We also find that the visibility to consumers or efficiency enhancement does not incrementally contribute to the effect of TQEM on the adoption of pollution prevention practices. These findings are robust to controlling for the timing of TQEM adoption and any type-specific trends in pollution prevention activities. Because the pollution prevention activities most strongly affected by TQEM are generally more prevalent in the petroleum refining and chemical manufacturing, these sectors experience the largest impact from the adoption of TQEM on pollution prevention innovation.