Ecological Modernization and Environmental Innovation: What Role for Environmental Regulation?
This paper investigates from a firm level perspective the favourable innovation conditions that affect the adoption of EM-based Technological Environmental Innovation (TEI), and how different policy frameworks and instruments affect the conditions and outcomes of adoption. The TEI adaptation and diffusion are determined by economic condition (financial incentives), firm condition (technical/organizational capabilities and partnership) and stakeholder condition (attitudes and perception).
In the EM framework, market-based and voluntary measures have been accorded a significant role. However, these measures are sometimes inadequate to overcome various barriers. Incorporating findings from business and innovation economics, this paper reconsiders the possible role of regulation and advocates the strategic complementation of market-based and voluntary measures with environmental regulation (i.e. New Environmental Regulatory Approach (NERA)). With proper design and implementation, the regulatory threat can reinforce incentive-based/voluntary measures. The synergy can enhance the innovation conditions better. A proposed theoretical model illustrates how the policy process can iteratively improve the favourable innovation conditions to achieve EM-based TEI.
To illustrate the viability of the NERA, three empirical case studies are presented. The first case study on the adaptation of fuel cell buses in California confirms that regulations can stimulate the transport industry to search for innovative solutions. The second case study on the diffusion of Euro III/IV technology shows that the strategic coupling of regulations and other instruments, motivated bus operators in Hong Kong to adopt TEI. The third case study on the diesel-to-LPG taxi/PLB switch shows that regulatory pressure together with negotiation and incentives enhanced the innovation conditions among the operators. All these cases illustrate the viability and superiority of the NERA.
The study targets to provide new insights on the relevancy of the Eurocentric EM model in non-European contexts such as Hong Kong or California.