Is Firm-Level Clean or Dirty Innovation Valued More?

The European Journal of Finance

96 Pages Posted: 2 Oct 2019 Last revised: 23 Jun 2020

See all articles by Antoine Dechezleprêtre

Antoine Dechezleprêtre

London School of Economics & Political Science (LSE)

Cal B. Muckley

University College Dublin

Parvati Neelakantan

University College Dublin

Date Written: June 05, 2020

Abstract

We examine how Tobin's Q is linked to `clean' and `dirty' innovation and innovation efficiency at the firm level. Clean innovation relates to patented technologies in areas such as renewable energy generation and electric cars, whereas dirty innovation relates to fossil-based energy generation and combustion engines. We use a global patent data set, covering over 15,000 firms across 12 countries. We find strong and robust evidence that the stock market recognizes the value of clean innovation and innovation efficiency and accords higher valuations to those firms that engage in successful clean research and development activities. The results are substantively invariant across innovation measurement, model specifications, estimators adopted, select sub-samples of firms and United States and European patent offices.

Keywords: innovation, research and development, patents, citations, clean technologies, dirty technologies, market value

JEL Classification: G35, G32, C58

Suggested Citation

Dechezleprêtre, Antoine and Muckley, Cal B. and Neelakantan, Parvati, Is Firm-Level Clean or Dirty Innovation Valued More? (June 05, 2020). The European Journal of Finance, Available at SSRN: https://ssrn.com/abstract=3457820 or http://dx.doi.org/10.2139/ssrn.3457820

Antoine Dechezleprêtre

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Cal B. Muckley (Contact Author)

University College Dublin ( email )

Blackrock, Co. Dublin
Ireland
+353-1-716-8091 (Phone)

Parvati Neelakantan

University College Dublin ( email )

Carysfort Ave
Blackrock
Ireland

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