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Is economic complexity an enabler of environmental innovation? Novel insightful lessons from European region

Le Thanh Ha (Department of Microeconomics, Faculty of Economics, National Economics University, Hanoi, Viet Nam)

Management of Environmental Quality

ISSN: 1477-7835

Article publication date: 10 February 2023

Issue publication date: 7 March 2023

151

Abstract

Purpose

This paper empirically examines the influences of economic complexity performance on environmental innovation implementation.

Design/methodology/approach

The research is based on four measures designed to assess the effectiveness of environmental innovations in 24 European countries, including the percentage of enterprises implementing environmental innovation investment (% of surveyed firms), the percentage of enterprises implementing environmental innovation activities (e.g. implementation of resource efficiency actions, sustainable products or ISO 14001 certificates) measured, a number of enterprises having new ISO 14001 registration and a number of environmental innovation related patents. After conducting various tests for longitudinal correlations and asymmetry of the studied series, we examine the relationship between product proximity, economic complexity and environmental innovation (EI) implementation using the panel-corrected standard error model (PCSE) model in the following section. The feasible generalized least squares (FGLS) model is employed to further verify our findings by taking into account heteroscedasticity. An application of the two-step generalized mixed model (GMM) is considered to resolve an endogeneity issue. In addition, the dynamic fixed-effects estimate (DFE) estimator is applied to the autoregressive distributed lag (ARDL) method in order to calculate both the short-run and long-run effects. As indicated by Ha (2022a, b) and Ha and Thanh (2022), the DFE-ARDL method can be used to identify both time-fixed effects and country-fixed effects.

Findings

The authors provide empirical evidence to propose the mechanism through which economic complexity encourages the implementation of environmental innovation through favorable impacts of economic complexity on environmental innovation investments of firms and governments and the public's awareness regarding the importance of environmental innovations.

Practical implications

This research provides important implications for policymakers in promoting environmental innovations.

Originality/value

The study is the first to empirically examine economic complexity performance's influences on environmental innovation implementation. It is also the first to investigate the importance of institutional quality in enhancing the influence of economic complexity on environmental performance.

Keywords

Acknowledgements

Funding: This research was supported by National Economics University.

Citation

Ha, L.T. (2023), "Is economic complexity an enabler of environmental innovation? Novel insightful lessons from European region", Management of Environmental Quality, Vol. 34 No. 2, pp. 331-350. https://doi.org/10.1108/MEQ-08-2022-0244

Publisher

:

Emerald Publishing Limited

Copyright © 2022, Emerald Publishing Limited

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