Management Science 2026
Waiting or Acting: The Effects of Environmental Regulatory Uncertainty on Green Innovation
Abstract
This paper investigates how environmental regulatory uncertainty affects green innovation in polluting firms. The findings suggest that, instead of adopting a passive “wait-and-see” strategy, polluting firms proactively engage in green innovation and R&D activities. To address endogeneity, I employ an instrumental variable approach using political polarization in roll-call votes on environmental and climate issues in the U.S. House of Representatives. I also exploit the proposal of the Affordable Clean Energy rule in 2018 as an exogenous shock in a difference-in-differences framework. The results are consistent with the growth options view of green innovation in polluting firms. Additional evidence suggests that environmental regulatory uncertainty leads to reductions in toxic emissions.
- DOI
- 10.1287/mnsc.2024.06051
- Language
- en
- Sources
- crossref openalex