Citation: Riehl, K.; Kiesel, F.;
Schiereck, D. Political and
Socioeconomic Factors That
Determine the Financial Outcome of
Successful Green Innovation.
Sustainability 2022, 14, 3651. https://
doi.org/10.3390/su14063651
Academic Editor: Luigi Aldieri
Received: 25 January 2022
Accepted: 7 March 2022
Published: 20 March 2022
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Article
Political and Socioeconomic Factors That Determine the
Financial Outcome of Successful Green Innovation
Kevin Riehl
1,
* , Florian Kiesel
2
and Dirk Schiereck
1
1
Law and Economics Department, Technical University of Darmstadt, 64289 Darmstadt, Germany;
dirk.schiereck@tu-darmstadt.de
2
Economics and Management Department, Free University of Bozen-Bolzano, 39100 Bolzano, Italy;
florian.kiesel@unibz.it
* Correspondence: kevin.riehl@stud.tu-darmstadt.de
Abstract:
Green innovation and technology diffusion must be financially and commercially attractive
to convince corporate decision makers. This paper focuses on the factors that determine the financial
outcome of successful green innovation activities conducted by large, listed companies. We employ
a cross-industry dataset including more than 97,954 reports on corporate environmentalism from
286 international listed companies. Our results indicate that economic, political, cultural, firm-
specific, investor-related, and governance factors significantly determine the financial performance
of green innovation, measured by abnormal returns. Moreover, we can show that factors that
reduce the competition in green innovation markets benefit the financial success of firms operating
via them. Finally, we find an opposing influence for several factors that benefit earlier stages of
innovation (e.g., research output) while harming the later stages (e.g., market introduction and
financial performance). These findings imply that a spatial separation strategy for different stages
of innovation supports corporate environmentalism activities. Moreover, physical property rights,
the governments’ willingness to support green technologies, and economic framework conditions
such as oil price, GDP, or public R&D budget need to be balanced by policymakers to address and
stimulate green innovation.
Keywords: green innovation; corporate environmentalism; Porter hypothesis
JEL Classification: C58; G14; Q56
1. Introduction
Climate change, pollution of the environment, and the consecutive challenges for
the 21st century have been increasingly recognized by governments, policymakers, and
industry over the last decade. It is therefore vital to transition from environment- and
resource-intensive trajectories to more sustainable growth paths for the global economy.
This also requires corporate environmentalism and (green) technological innovation [
1
].
To realize sustainable growth paths, green innovation and technology diffusion must be
financially and commercially attractive to convince corporate decision makers to introduce
environmentalism [
2
]. The current strand of literature on the financial attractiveness of
green innovation can be divided into two parts [
3
]: the traditional view follows Friedman [
4
]
and considers green innovation as firm-value decreasing, while the Porter hypothesis [
5
]
argues that environmental policies, adoption of corporate environmentalism, and green
innovation increase profits of firms by reducing costs and increasing revenues. In fact, prior
studies provide empirical evidence to support the Porter hypothesis for many cases [
6
];
however, we do not yet observe the global economy moving towards green, sustainable
societies in the current growth path. Previous studies found three main barriers causing
companies to fail in corporate environmentalism: market failure and deficiencies; regu-
latory issues; and financial problems for green innovation [
7
]. Therefore, scholars have
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