The effect of carbon emissions on firm performance and the moderating effect of innovation
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2020-08-19
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en
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While there has been research on the effect of carbon emissions on firm performance, relatively little is known about potential moderating factors. As an opportunity for firms to become more (energy) efficient, investing in innovation is an important factor to investigate with regards to the carbon emission and firm performance relationship. This paper investigates how investment in innovation affects the carbon emissions and firm performance relationship. For this purpose a fixed effect model is developed for estimation, analyzing a global panel dataset of 635 firms from 2012 to 2018. The results show a negative effect of carbon emissions on firm performance. The results also indicate that investment in innovation attenuates this negative effect. However, the analyses show different results for the different measures of performance. The negative effect of carbon emissions on firm performance is established for ROA and ROE, but not for Tobin’s q. Furthermore, the attenuating effect of investing in innovation can only be confirmed for ROA. The analysis also suggests an opposite amplifying effect of investing in innovation for Tobin’s q. However, this effect is not robust.
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Faculteit der Managementwetenschappen