Carrots or Sticks: Which Policies Matter the Most in Sustainable Resource Management?

Abstract

Green growth has resulted from resource management, setting the speed for sustainable development. Eco-innovations are essential for the improvement of a firm’s performance with societal gains, demanding special attention from policy makers. This paper deals with the effect of policy actions on the enhancement of eco-innovation adoption. The Community Innovation Survey (CIS) 2012–2014 is used to estimate the impact of ‘carrots’ and ‘sticks’ on innovations with ecological benefits. In addition, the impact of a firm’s structural characteristics in ecological strategies is investigated. Regulations and taxes enhance eco-innovation, but grants are only relevant in the case of eco-innovations with external benefits. The firm dimension and non-technological innovation also increase the eco-innovation propensity. Embedding policy actions with environmental concerns will enhance social responsibility and promote resource preservation, providing waste as an economic value. The purpose of this paper is twofold. First, it aims to appraise the effectiveness of the different policy instruments applied in the adoption of innovation with ecological benefits with both internal and external benefits. Secondly, it aims to identify which firm characteristics determine these managerial strategies. Hopefully, light will be cast on the topic so that public and private decision-makers will be given recommendations for policy package design working towards smart and green growth.