Environmental Additionality: The Effect of Innovation Support on Firms’ Eco-Innovation Strategies

This paper examines the effect of generic innovation policy on eco-innovation rather than generic innovation. Hence in doing so, the paper analyses the existence of environmental additionality of generic innovation policy. The empirical analysis applies propensity score matching to account for endogeneity and unobserved firm heterogeneity, using Spanish firm level data during 2008-2016. We find that in the short term, regional policy is effective in stimulating eco-process innovation, and in complementing national policy in fostering eco-product innovation. Conversely, national policy is effective in increasing eco-product innovation. Both are similarly effective in incentivising the reduction of environmental impact in dirty industries.