The causal impact of material productivity on microeconomic competitiveness and environmental performance in the European Union

Abstract

Interdisciplinary scholars and policymakers in the European Union (EU) claim that increasing material productivity improves the competitiveness of firms. However, the current evidence base has two main shortcomings. First, most studies fail to provide evidence beyond case studies, thus not considering dynamic effects and heterogeneity across firms, sectors, and countries. Second, they do not adequately take the endogeneity of changes in material productivity into account. In this paper, we investigate data from the Community Innovation Survey comprising over 52,000 firms across 23 sectors and 12 EU member states. Moreover, we take an instrumental variable approach to account for endogeneity. Our findings provide evidence for a positive and causal effect of material productivity improvements on microeconomic competitiveness for those firms that received targeted public financial support to realise eco-innovations. The effect tends to be limited to firms in certain materialintensive sectors and countries. We further show that such increases in material productivity reduce the firms' carbon dioxide footprint, thus achieving both economic and environmental objectives. Therefore, our findings provide the important policy insight that tailoring the availability of public financial supports to sector and country specific circumstances and those eco-innovations that increase material productivity is most promising in reconciling competitiveness and climate change mitigation objectives.

Circular economy innovations, growth and employment at the firm level: Empirical evidence from Germany

“…Concerning the special case of CE innovations, there is only very rare evidence at the firm‐level, however, which mainly relates to productivity and profitability impacts of CE. A study of Flachenecker and Kornejew () based on cross‐country firm‐level data from the CIS 2008 finds evidence “for a positive and causal effect of material productivity improvements on microeconomic competitiveness for those firms that received targeted public financial support” (Flachenecker & Kornejew, , p. 87). Nevertheless, the authors show that the positive effects are limited to certain sectors and countries.…”

Employment and Performance Effects of Circular Economy Innovations

“…Unfortunately, the empirical literature on these specific innovation activities is quite small up to now. An exception is the study of Flachenecker and Kornejew (2019) which analyzes the impact of material productivity on microeconomic competitiveness and environmental performance in the European Union. The study uses data from the Community Innovation Survey (CIS) 2008, comprising over 52,000 firms across 23 sectors and 12 European countries.…”

Business Demography and Economic Growth: Similarities and Disparities in 10 European Union Countries

“…Likewise, the competition for resources requires the compliance with certain conditions regarding their use, conservation and regeneration, so that the economy, and the society at large, could be given the space to develop, and progress harmoniously through resilience. Most of this research lay the stress on the analysis and distribution of the specific business indicators, and economic efficiency, giving less space to the business environment and, implicitly, to the SME demography, as also shown by (Flachenecker & Kornejew, 2019;Rotar et al, 2019;Cravo & Piza, 2019) or Sumiati (2020). Therefore, the main contributions to this paper are the analyses of the evolution, concentration and shaping up, and the affiliation of a country or group of countries to an economic model already well defined by economic writings, from the perspective of indicators specific for SMEs and business demography, and of their influence on the development of specific business models.…”