The Relationship between Environmental Efficiency and Manufacturing Firm's Growth

30 Pages Posted: 10 Jan 2009

See all articles by Giulio Cainelli

Giulio Cainelli

Università degli Studi di Bari - Dipartimento per lo Studio delle Societa Mediterranee; CERIS-CNR

Massimiliano Mazzanti

University of Ferrara & CERIS CNR, Italy; CESAER INRA, UMR, France

Roberto Zoboli

CERIS-CNR Italian National Research Council; Catholic University of Milan

Date Written: December, 19 2008

Abstract

This paper investigates the empirical link between emission intensity and economic growth, using a very large data set of 61,219 Italian manufacturing firms over the period 2000-2004. As a measure of lagged environmental performance (efficiency) at firm level we exploit NAMEA sector for CO2, NOx, SOx data over 1990-1999. The paper tests the extent to which (past) environmental efficiency/intensity, which is driven by structural features and firm strategic actions, including responses to policies, influences firms growth. Our results show, first, a typical trade off generally appearing for the three core environmental emissions we analyse: lower environmentally efficiency in the recent past allows higher degrees of freedom to firms and relax the constraints for growth, at least in this short/medium term scenario. Nevertheless, the size of the estimated coefficients is not large. Trade off are significant for two emission indicators out of two, but quite negligible in terms of impacts, besides the case of CO2. For example, growth is reduced by far less than 0.1% in association to a 1% increase of environmental efficiency. Environmental efficiency does not seem a primary cost factor and constraint to growth if compared to other factors affecting firm targets and firm competitiveness. In addition, non-linearity seems to characterise the economic growth-environmental performance relationship. Signals of inverted U shape appears: this may be a signal that both firm strategies and recent policy efforts are affecting the dynamic relationship between environmental efficiency and economic productivity, turning it from an usual trade off to a possible joint complementary/co-dynamics, where bad environmental performances hamper firm growth and investments in greener technologies may be associated to positive economic performances of firms and sectors.

Keywords: Firm growth, Manufacturing, Emission intensity, Economic performance, Environmental performance

JEL Classification: C23, D21, O32, Q55

Suggested Citation

Cainelli, Giulio and Mazzanti, Massimiliano and Zoboli, Roberto, The Relationship between Environmental Efficiency and Manufacturing Firm's Growth (December, 19 2008). FEEM Working Paper No. 99.2008, Available at SSRN: https://ssrn.com/abstract=1318332 or http://dx.doi.org/10.2139/ssrn.1318332

Giulio Cainelli

Università degli Studi di Bari - Dipartimento per lo Studio delle Societa Mediterranee ( email )

Piazza Umberto I
70124 Bari, 70121
Italy

CERIS-CNR ( email )

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Massimiliano Mazzanti (Contact Author)

University of Ferrara & CERIS CNR, Italy ( email )

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Ferrara, 44100
Italy

CESAER INRA, UMR, France ( email )

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Roberto Zoboli

CERIS-CNR Italian National Research Council ( email )

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Italy
+390223699503 (Phone)
+390223699530 (Fax)

Catholic University of Milan ( email )

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Italy
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