Policy-Induced Environmental Technology and Inventive Efforts: Is There a Crowding Out?

Hanna Hottenrott, Sascha Rexhäuser

Research output: Contribution to journalArticlepeer-review

48 Scopus citations


Substantial policy effort is devoted to stimulate environmentally friendly technology through regulation and subsidies. Since innovation is a crucial productivity driver, a potential crowding out of inventive efforts in affected firms may increase the cost of regulation. We study the effects of regulation-induced environmental technology on innovation activities for a sample of firms in Germany. We find some evidence for a crowding out of firms' in-house R&D, especially for firms facing financing constraints. Innovation outcomes and investments in innovation-related fixed assets are not affected. Moreover, subsidy-backed environmental technology does not crowd out R&D.

Original languageEnglish
Pages (from-to)375-401
Number of pages27
JournalIndustry and Innovation
Issue number5
StatePublished - 4 Jul 2015
Externally publishedYes


  • Environmental policy
  • R&D
  • crowding out
  • innovation
  • regulation
  • technological change


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