Impact of environmental regulations on innovation and performance in the UK industrial sector

Abstract

Purpose – The role of environmental regulations in inducing innovation and improving performance has been studied in the literature. However, there have been no studies in the UK using statistical data. This paper aims to study the links among regulations, innovation and performance in the UK using sector level data. Design/methodology/approach – The paper used structural equation modelling to study the links among the three variables simultaneously. Findings – The analysis indicates that environmental regulations in the UK are significant in improving economic performance of the industrial sectors. They also find that, in the short run, environmental regulations negatively influence innovation, and innovation negatively influences economic performance in these sectors. Practical implications – The results have implications both for policy makers and firms in the UK industrial sector. For policy makers, environmental regulations have generally improved economic performance. For firms, the study shows that sufficient planning in meeting government's environment standards can help improve their economic performance. Originality/value – This is the first study in the UK to explore simultaneously the links among the three variables: environmental regulations, innovation, and performance, using secondary sector level data.