Country development and eco-innovation performance : evidence from developing and in transition countries

(1)

“Country development and eco-innovation performance– Evidence from developing and in transition countries”

Master Thesis of MSc.BA- International Management 2016-17

Supervisor: Dr. Mashiho Mihalache

Second reader: Dr. Markus Paukku

Author : Eleni Kilipiri ( student number 11386215)

University of Amsterdam (UvA)

(2)

1 | Master Thesis E. Kilipiri

Statement of Originality

This document is written by student Eleni Kilipiri who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in

creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

(3)

2 | Master Thesis E. Kilipiri ABSTRACT

Environmental issues have become part of the development agenda in countries, while eco-innovation and sustainability have become essential needs for contemporary world (Horbach, 2016). The economic growth of many countries is often accompanied by the excessive use of resources, and the negative environmental and social impacts that derive from it. The development and/or adoption of eco-innovations aim at minimizing the negative impacts of excessive resources use (including also energy use) in countries (Hermosilla et.al.,2010). Many countries, that want to enter and compete in the global market, often face high technological and environmental gaps and barriers, compared with the developed countries, which force them to comply with certain environmental regulations in order reach a specific level of development (Dong et. al., 2014).

Environmental policies and regulations consist important factors for innovation and technological development, when countries try to accomplish sustainability and achieve higher levels of eco-innovation performance (Horbach, 2008). Countries and companies, by adopting and implementing several regulation and standards, such as ISO14001, perform more efficient and eco-friendly in an international scope (Lin et. al. 2013). Developing and in transition countries are characterized by an economic growth that makes them substantial competitors of developed countries (Jang et. al., 2015). However, they lack of environmental awareness and performance. These countries need to look inward in order to adopt and develop technologies that are appropriate and necessary for self-sufficiency, resource efficiency, sustainable development and high environmental performance that depends on eco-innovations (Santana et. al., 2015). As a result, whether the country’s technological level of development or not consists a key issue of research for the eco-innovation performance of developing and in transition phase countries.

Key-words: eco-innovation; eco-innovation performance; level of development; technological

capabilities; ISO Certification 14001; developing countries; in transition phase countries; environmental policies; regulatory context

(4)

3 | Master Thesis E. Kilipiri Table of contents 1. Introduction ... 6 2. Literature Review... 8 2.2 Country development ... 10 2.2.1 Technological Development ... 11

2.2.2 Developing and in transition phase countries ... 12

2.3 Environmental Policies and regulations... 14

2.4 Environmental certification ... 15

3. Theoretical Framework ... 18

3.1 Technological Development-Exports and Eco-Innovation Performance ... 18

3.2 The moderating effect of Environmental Policies ... 19

4. Methodology ... 20

4.1 Selection and Description of Sample ... 21

4.2 Selection and Description of Method(s) ... 22

4.3 Description of Variables ... 23 4.3.1 Dependent Variable ... 23 4.3.2 Independent Variable ... 23 4.3.3 Moderator Variable ... 24 4.3.4 Control Variables ... 24 4.4 Data collection ... 26 6. Discussion ... 29

(5)

6.1 Findings... 30

6.2 Academic Relevance and Managerial Implications ... 32

6.3 Limitations and Future Research ... 33

7. Conclusion ... 34

8. References ... 37

APPENDIX I: Eco-Innovation Scoreboard ... 48

(6)

5 | Master Thesis E. Kilipiri ACKNOWLEDGEMENTS

I would like thank my supervisor Ms. Mashiho Mihalache for her patience and excellent guidance during the whole preparation period of my Master Thesis. She was very well organized, she was trying continuously to do her best in order to improve my effort and work, while she was very open to discuss my ideas, my obstacles or challenges during my research and to help me in finding the appropriate solutions. By her continuous feedback and her flexibility on my delivered parts, I was able to learn many valuable things. In this point, I would like to thank also Mr. Markus Paukku for the effort and time he spent to read and to evaluate my Master Thesis. Finally, I would like to thank my parents as they were always supporting me during all this period of my studies. With their faith and their efforts to provide me the best they could, they were the driven force for me in order to have self-motivation in my life, to try to do my best and to set new goals.

(7)

6 | Master Thesis E. Kilipiri 1. Introduction

The phenomenon of increasing population in combination with the overconsumption or overuse of resources and the environmental issues have become among the salient, but most essential, problems that the contemporary world has to face and to overcome (Hojnik & Ruzzier, 2016). Governments, scientists, researchers and managers try to find solutions regarding the above key issues in order to achieve a higher level of resource efficiency and a lower negative impact on the environment that can lead to an overall sustainable development (Ghisetti & Rennings, 2014).

Eco-innovation concept has been emerged by the global need to achieve sustainable development (Jang et.al., 2015). Both states and firms have established and implemented policies and strategies that promote the adoption of eco-innovation as a way to enhance their socio-economic and environmental performance helping them to reach a higher level of sustainable development and overall performance. Previous research argues that the relationship between eco- innovations and performance is positive (Chen et. al., 2006). Adopting, developing or implementing eco-innovations are “win-win solutions” for countries that face the conflict between economic or general development and environmental protection (Forsman, 2013). Developed countries, especially the European countries and the countries of OECD, have been significantly promote their development and eco-innovation performance through the adoption of eco-innovation policies (Jang et.al., 2015). More recently, developing countries and in transition phase countries are following the same direction by adoption and implementing policies that facilitate their development and eco-innovation performance (Horbach,2016).

Developing and in transition countries try to compete with the already developed countries in the global scene, as the first play important roles of major manufacturers and exporters in the international markets. These countries want to achieve higher economic development but they usually lack of environmental protection’s mechanisms or, in other words, eco-innovation performance in order to compete with the already developed countries (Horbach, 2016). At the same time, they are in a disadvantageous position regarding the development of technological and scientific capabilities, which play an essential role on their ability to perform eco-innovatively.

(8)

Α country’s capacity in creating and using technology consist key factors in determining its general development and performance (Archibugi & Coco, 2005). A technology driven economy aims at boosting catching-up, increasing productivity, improving health and quality of life, reducing environmental impact and achieving high performance (Santana et. al., 2015). Developed countries have already achieved a high level of technological development, while developing and in transition phase countries are facing crucial obstacles because of lack of resources and/ or capabilities (Horbach,2016). As a result, developing countries and in transition phase countries are required to put more efforts and money in order to eco-innovate. For instance, companies in more wealthy countries are capable to educate/train and to hire scientists or environmental professionals faster and more easily than in developing countries (Ramanathan et. al., 2010).

The above countries try to fill these gaps by implementing several steps of development. They introduce innovative cleaner technologies, export high technology products, develop eco-friendly processes and attract foreign direct investments (FDI) in order to achieve transfer of knowledge and capabilities (Jang et. al., 2015). While they want to compete in the global scene, they are forced to follow and to adopt a certain range of policies and regulations regarding the environmental protection of the planet, as they have to reach the same level of environmental protection of the developed countries (Ramanathan et. al., 2010). In general, regulatory context has been identified as an important external driver of eco-innovation performance both at a country and firm level. Countries and companies that do not comply with global and national environmental regulations, they face “legal sanctions, fines or losses” (Huang et. al., 2016, pg. 3424-3425).

Challenged by all these concepts, this paper focuses on analyzing eco-innovation performance at a macroeconomic level of study. In details, it tries to fill the gap that exists in the literature regarding the developing and in transition phase countries and to examine whether a relationship exists between country’s technological development, determined by high-technology exports, and its eco-innovation performance, expressed in ISO Certification 14001 adoption terms. Furthermore, as environmental policies have direct influence on country’s (environmental) eco-innovation performance, the examination of this impact on the above mentioned relationship is studied as well to illustrate the

(9)

importance of regulatory push effect (Horbach, 2016). By examining all the above, this Master Thesis will try to prove the importance of study of the specific research gap, it will elucidate the different and confrontational points of view regarding the mentioned issues and it will contribute by offering recent results that are useful in the scientific literature for eco-innovation on country level of study.

The remaining of this Master Thesis is structured by the subsequent sections. The next part consists the literature review of the main concepts of research topic and the presentation of links between them that end with the formulation of the research question. In the third part, the theoretical / conceptual model is formulated and tries to answer the proposed research question by introducing the hypotheses. In the next section, details regarding the methodology of data collection and the variables are introduced and then an analysis presents the results of this research. The sixth part of the paper discusses the main findings of the research, its limitations and propositions for future research. Finally, the last part of this thesis consists an overview of the most important outcomes.

2. Literature Review

2.1 Eco-innovation and eco-innovation performance

The “Green economy” concept has been used extensively in order to identify the “financial and climate change crisis” and to underline the importance of environmental protection and sustainability around the globe (Loiseau et al. 2016). The creation of new products, the transformation of processes, and/or the development of new (domestic and global) markets set the stage for introducing innovations under the green economy perspective (Chapple et. al., 2011). The term is used in order to describe any economic activity that tries to reduce the negative impact on the environment (Chapple et al.,2011).The derivatives of Green economy are called “green innovations” or “environmental innovations or “eco- innovations”. As countries and companies tend to increase their environmental awareness and to adopt eco-friendly approaches, the term of “eco-innovations” is more and more often presented in the recent literature of innovation studies (Cai & Zhou, 2014).

These innovations include the “production, application or exploitation of a good, service, production process, organizational structure, or management or business method that is novel to the

(10)

firm or user and which results in a reduction of environmental risk” (Hojnik & Ruzzier, 2016, pg 812-813). Fussler and James (1996) as well as Kemp and Pearson (2008) have defined the term of eco-innovation as the process which includes the development of new products, processes, services or management , provides a certain value to customer and business and significantly decreases the negative impact on environment, while Cai and Zhou (2014) have added in the above definition also the aspect of improvement of current products, processes and management that have net reduced environmental impacts in society (Zailani et. al., 2015).

Furthermore, the development and/or adoption of eco-innovations aim at minimize the negative impacts of resources use (including also energy use) (Carrillo-Hermosilla et.al.,2010). The optimization of resources’ use consists one of the main considerations of the European Commission, as it believes that eco-innovation is tightly related with the concepts of “eco-efficiency” or efficiency in using the natural resources through the implementation of technological and non-technological innovations (Davidescu et. al., 2015). Bossle et. al. (2016) also mention the importance of eco-innovations as basic tools to keep up with the continuous changes in technology around the world.

According to Hermosilla et. al. (2010), eco-innovation is a key driver for the improvement of eco-innovation performance. Eco-innovation performance refers to the level of achievement a country or company has reached within all the all stages that eco-innovation can be implemented (e.g. environment, economy, education, human capital, production etc.) (Hua & Zhongju, 2010). As Rennings (2000) supports, the higher the capabilities (either general or technological) a country or company or industry has, the better its eco-innovation performance.

However, there are two different point of views regarding the effect of innovation on eco-innovation performance and general performance expressed by the well-known “Porter-Wagner dilemma”. According to Porter (1991), the environment consists a “strategic competitive factor” both for differentiation and creation of competitive advantage, while Wagner sees the environment as a “luxury good” (Mazzi et. al., 2016). Palmer et al. (1995) have indicated that spending money for introducing or adopting eco-innovation activities for improvement of environmental impact leads to decrease the level of productivity, which is highly related with performance. On the other hand, if a

(11)

company or country invests in eco-innovations, this option will lead to a significant reduce of operational costs (also by applying green technologies) and as result to gain a potential competitive advantage, to increase its market share in the world and to boost its overall performance (Riilo,2017; Woo,2014).

2.2 Country development

Previous studies have stated that the eco-innovation levels of performance differ significantly according to a country’s development level (Jo et. al. 2016). Developed countries usually display higher eco-innovation performance than the developing or less developed countries. Kemp and Pearson (2008) have proposed that this is caused by the fact that the financial inputs and resources for the development and implementation of eco-innovations differ according to each country’s development level.

Resource Based View theory (RBV) (Rugman & Verbeke, 1998; 2000) states that resources and capabilities, both at country and firm level, have been distributed heterogeneously and they are highly related with performance. As a result, the differences in performance between countries/firms are caused by their heterogeneous distribution of resources and capabilities (Albort-Morant et. al. 2016). The effective utilization and application of resources and capabilities are crucial factors for achieving a sustained competitive advantage (Barney, 1991). Countries that can apply greater resources into environmental practices enjoy superior performance and higher level of development (Li, 2014).

Moreover, the interdependence between development and environment is arising as a new and alternative approach to the classical definition of development at country level (Santana et. al., 2015). According to the classical approach of development, high economic growth rates lead to high level of country’s development and better social stability inside a country (Scheel & Vazquez ,2011). Economic growth is usually measured by the increase of Gross Domestic product (GDP) per capita, which consists a fundamental indicator for presenting improved living standards of population within a country that lead to increased productivity and performance (Cracolici et al., 2010). As Santana et. al. (2015, pg. 427) have indicated, “the positive and significant effect of GDP on all social and environmental dimension highlights that a good level of the economic dimension is a basic condition to achieve a good

(12)

social–environmental performance”.

Foreign Direct Investment (FDI) is considered as another indicator for measuring a country’s development. Several academic studies underline the impact on foreign investment in a country on its level of development, as the first is usually related with country’s exports and country’s level of internationalization (Kanda et al., 2015). A fast growth of international trade and foreign direct investment (FDI), which are considered to be the most common ways of a country to achieve high internationalization and easy entrance in international markets, leads to high economic development at country level (Peñasco et. al. 2017; Kanda et al., 2015).

Constantini and Mazzanti (2012) show that trade openness helps countries to increase their level of innovation, and improve their development, as the participation in global markets provides key opportunities for domestic exporters to compete and gain important knowledge flows through their interaction and cooperation with the foreign exporters (Boermans & Roelfsema, 2012). Similarly, the impact of foreign equity on innovation is considered to be positive to a country’s level of innovation as, by attracting foreign equity, a country is able to absorb new and valuable knowledge, skills, human capital and technological capabilities (Peñasco et. al. 2017).

High levels of a country’s foreign equity and technological capabilities lead to an increased performance of exports (UNU-MERIT,2008). Advances in technology within a country are able to improve country’s level of sustainability, overall performance and self-efficiency (Santana et. al., 2015).

According to Blohmke (2014), developed economies tend to present more often advances in technology other than developing or in transition phase economies, that tend to move more slowly.

2.2.1 Technological Development

Technological progress and development help in creating and activating markets through the introduction of new products and services, as they increase the motivation towards eco-innovation (Jang et. al.,2015). Advances in technology consist key drivers that boost the development of a country and provide a solid base for being able to compete in the international markets (Davidescu et.al., 2015). The country’s ability regarding its scientific and technological development to compete and achieve higher performance in a global scope is called technological capacity (Bossle et. al. ,2016). Technological

(13)

capacity refers to country’s capabilities by creating new scientific knowledge and technologies (through R&D investments, patents), using its resources (human resources, R&D resources, technologies, knowledge inflows and resources) effectively and efficiently and by promoting and expanding these capabilities abroad though its exports (Horbach,2012).

Competences in technology and science lead to the development of innovations that foster the creation of products, processes and services which improve country’s socio-economic performance and support the journey to sustainability, which is highly related with the country’s environmental impact (Davidescu et. al.,2015). As a result, technological development leads to structural changes within a country, while it increases productivity and the quality of life (Santana et.al., 2015) and influences positively country’s economic growth (Cracolici et. al., 2010).

According to the OECD (2005), technological development and innovation are linked each other as they are responsible both for a country’s improved performance and for a higher level of employment that leads also to further economic growth. Scheel et. al. (2011) have indicated that high R&D expenditures on technological innovations contribute in order a country to achieve and maintain high income levels.

However, Sabadie (2014) has stated that in some cases increasing investments in technological innovation and development do not confirm that a developing or in transition country will be able to handle its environmental impact as the more it tries to compete with the already developed countries, the higher its levels of pollution will be because of lack of key resources and capabilities.

2.2.2 Developing and in transition phase countries

A country’s resources and capabilities are often presented as key terms in growth models of global literature suggesting that developing and in transition economies/countries will pass firstly through a more resource- and pollution-intensive phase, before meeting “the more resource-efficient and low-pollution patterns expressed in developed countries” (Beltrán-Esteve & Picazo-Tadeo, 2017, pg.1; Dong et. al., 2014). In general, resource efficiency consists a key term for determining the level of a country’s development. Internal (e.g. R&D structure, human resources, knowledge sourcing, natural resources,

(14)

exports and technological capabilities) and external resources (e.g. external knowledge, FDI Inflows,

alliances etc.) of a country contribute significantly on the increase or decrease of a country’s development (Cainelli et. al., 2015).

Developing and in transition countries are countries which present an economic growth accompanied with a change in their economic and social structure (Walz & Eichhammer,2012). The latter are characterized by a rapid economic growth and they are usually named as new industrializing countries, as they move towards an industrial development leaving behind their agricultural productivity, which consisted their main economic sector of development (Jupesta et. al., 2011). Both developing and in transition countries have a substantial GDP growth rates and “have reached an intermediate GDP per capita level between traditional OECD countries and the lowly developed world” (Walz & Eichhammer,2012, pg.80).

According to Horbach (2014), economic development through eco-innovation is the first priority for the majority of developing and in transition countries outside the EU and OECD. Two possible explanations are responsible for the above statement. First, these countries are facing serious environmental issues that do not permit them to achieve further development, while they delay their global competitiveness, as they have to spend time and money in order to deal with the specific issues. They are often characterized by less R&D input, a decreased environmental awareness of the population and by high energy intensity of the economy (Horbach,2014).

Second, in order to reduce their environmental impact on their society and solve their socio-economic problems derived by the environmental issues (e.g. intensive gas emissions which leads to negative contribution on green-house effect, bad impact on people’s health and general decreased performance because of inefficient use of resources), these countries try to have better access to technologies , to develop their own technologies/innovations and to use more efficiently their resources and capabilities that contribute positively on the above fundamental obstacles achieving further development both in economic and environmental terms (Chen & Hung, 2014).

Horbach (2014) has stated that each country, according to its resources and capabilities, introduces differently regulatory and economic instruments for the implementation of eco-innovation.

(15)

In general, the majority of the above countries presents insufficient resources to achieve eco-innovation and as a result, technology transfer in these countries consists key source of innovation by depending on external financial and technical support (Jang et. al., 2015). Moreover, these countries are usually highly dependent on the demand side instruments (regulations) in order to accomplish the policy objectives for eco-innovation and environmental protection introduced by their governments and imposed by developed countries (Horbach,2016).

2.3 Environmental Policies and regulations

Governments formulate and impose environmental policies and regulations to directly or indirectly establish limits to control the excessive use of resources emissions and to reduce the negative outputs of society to the environment (Cohen & Levinthan ,1989). As a result, the implementation and diffusion of eco-innovation at national level consist some of the principal roles of governments (Jang et.al., 2015). Governmental policies are usually more required and important during the initial stage of eco-innovation and they can promote the adoption eco-eco-innovation as a “policy goal” for boosting performance (Jang et.al., 2015). Regulatory instruments consist one of the main categories of governmental policies and they refer to obligatory rules, laws, orders, directives, norms, decisions and standards (Ramanathan et. al., 2010).

Traditionally, environmental regulations have been considered as a threat for companies because they introduce costs associated with compliance to regulation that harm companies’ competitive capacity and performance (Tamayo-Orbegozo et. al., 2017). This approach is defined as “the traditional cost-based approach” suggesting that costs produced by strict environmental regulation will threaten the innovation, competitiveness and productivity both at firm and at country level (Palmer et al., 1995). According to the traditional view, although environmental regulations are necessary for the society and environmental protection, they force firms to internalize costs that they didn’t consider previously reducing their competitiveness and performance (Ramanathan et. al. ,2010) Moreover, the statement is based on the fact that if firms, and especially small firms, within a country have to comply with many and strict regulations, it is more likely for them to move somewhere with less regulations and start their operational process as they will have less costs, more freedom and opportunities for innovation (Leitner

(16)

et. al., 2010). If firms do not choose to move somewhere with less environmental regulations, they will try to achieve a minimum compliance with regulations in order to avoid extra costs (Tamayo-Orbegozo et. al. ,2017).

Some researchers have stated that environmental regulations discourage innovation and entry of new firms in the global market as they often impose limits for further development (Ramanathan et. al., 2010). Porter (1991) has recognized that poorly designed environmental regulation may have a negative effect on firms’ willingness to innovate and expand their activities, while Filbeck and Gorman (2004) and Triebswetter with Hitchens (2005) have found that there is a negative relationship between environmental regulations and performance that lead to decreased productivity.

On the other hand, Porter and van der Linde (1995a;1995b) support that, if countries are imposed under strict environmental regulations, they will use their resources more efficiently and, by combining them with the appropriate technologies, they will reduce automatically their pollution levels and they will promote innovation by the development of new technologies increasing at the same time their levels of productivity. Kemp (2098) and Jang et.al. (2015) have supported that regulations motivate more radical innovations, and in particular, environmental regulation in combination with technological improvements contribute positively in the initial phase of eco-innovation.

Porter and van der Linde (1995a) have indicated that environmental policies and regulations help firms to gain early mover advantages, increase their profitability and influence positively performance. The first also identified that environmental regulations if they are designed in order to focus on the outcomes, they can lead to considerable change and better efficiency during the use of resources (Porter,1991).

2.4 Environmental certification

Environmental regulations represent one of the pressures that governments impose on firms in order to act more friendly to the environment. Policy makers make use of a variety of tools to ensure and to implement the environmental objectives. They impose either new environmental regulation policies, that boost eco-innovation, or establish and support soft regulations by giving more initiatives to countries to empower and to support the voluntary adoption of environmentally friendly practices (e.g.

(17)

ISO 14000 standards family), as environmental management systems (EMSs) provide multiple benefits and lead to higher performance (Riilo, 2017).

An EMS can be described as a formal set of procedures that tries to manage the impact of countries and/or companies to environment (Arimura et. al.,2016). As Coglianese and Nash (2001) have stated, EMSs tries to establish environmental policies and goals, that reduce the negative impact to and monitor the environmental progress. EMS consist a continuous-improvement model that minimize the negative environmental impacts (Arimura et. al.,2016). While many companies in any country have used EMSs for years, ISO 14001 is the first attempt to create an international EMS standard that can help in the diffusion process of environmental management concept similarly and globally (Campos et.al.,2015).

ISO 14001 is a process standard that provides flexibility in the types of environmental goals countries and firms want to establish and to achieve (Comoglio & Botta,2012). It emphasizes on processes, that will lead to better environmental impact, without thinking of the actual environmental performance outcomes (Khanna, 2001). It encourages to systematically manage, observe and improve environmental impacts of countries/companies by following a variety of internal management procedures (Arimura et al., 2016). Unlike regulation, ISO 14001’s voluntary approach and adoption permit companies to gain extra flexibility by developing EMSs according to their needs (Comoglio & Botta,2012).

Certification by ISO 14001 not only helps to reduce the negative environmental impacts but also promotes the adoption of environmental standards within the companies and to all members of supply chain inside and outside of a country (Fikru,2014). Two main theoretical approaches exist regarding the motivation that drive companies to adopt ISO 14001 standard in order to improve their environmental performance and to contribute to the country’s eco-performance. The first approach refers to DiMaggio and Powell’s (1983) study in which they illustrated that pressures derived by the external environment drive companies to adopt self-regulation mechanisms such as ISO 14001 standard. Mimetic, normative and coercive pressures are responsible for the above situation. Mimetic pressures push companies to adopt the same processes and standards with their competitors for reasons of catching-up and replication

(18)

of successful methods to gain market opportunities, normative pressures lead firms to adopt the idea that ISO 14001 certification is an essential tool for their corporate reputation while coercive pressures refer to pressures that are derived by the demands of other parties such as customers or governments (Mariotti et. al., 2014). The second approach supports that companies choose to be certified by ISO 14001 because their motivation depends on the existence of their internal resources and capabilities (e.g. management capabilities and human resources) (Wernerfelt, 1984).

Potoski and Prakash (2005) have stated that companies, and consequently, countries use their ISO 14001 standard to certify their exports and to have access in global value chains, achieve higher development and improve their performance. They have also found that countries and companies with high levels of ISO 14001 usually develop a strong trade relationship with each other (McGuire,2014). However, Boys and Grant (2010) found that importing countries do not present any significant preference for partners that have similar certification levels with them and concluded that certification wasn’t completely associated with larger export volumes among importer and exporter countries. At the same time, as each country has different levels of development and presents differences on its performance in comparison with other countries, it imposes and follows a certain number of regulations according its needs, available resources and capabilities (Comoglio & Botta, 2012). In consequence, while ISO 14001 standards and their certifications are adopted by countries regarding their legal requirements, internal and external pressures and their specific needs, it is difficult to identify the real causation between ISO 14001 and financial, environmental and eco-innovation performance in each country (Rondinelli & Vastag, 2000).

According to all the above developed concepts, an interesting topic of discussion regarding major differences among countries arises and wants to answer the following research question:

Does a country’s level of development influence its eco-innovation performance, when regulation

(19)

18 | Master Thesis E. Kilipiri 3. Theoretical Framework

3.1 Technological Development-Exports and Eco-Innovation Performance

Developing and in transition phase countries want to enter and compete with the already developed countries in the global market, however, they face high technological and environmental pressures and gaps that force them to reach the same level of development and standards in order to achieve, if possible, first-mover advantages (Lieberman & Montgomery, 1987). Under this aspect, competences for technologies in developing and in transition countries are becoming increasingly urgent. While it is very common for these countries to import and apply knowledge from the outside (developed countries) (Desai et. al., 2002) in order to develop their technological capacity, many of them have started to invest in creating, enhancing and using their own scientific knowledge, research and technology in order to boost their level of innovation, to gain a competitive advantage over developed countries, which consist leaders in the global markets, to improve their eco-innovation performance and achieve higher technological development (Khayyat & Lee, 2015).

As technological development relies on country’s capacity to use efficient its own resources and capabilities, technological innovations, characterized by high R&D intensity, open up opportunities for reducing the negative impacts of human activities in the environment (e.g. gas emissions). The prospect of exporting them can provide incentives for the above countries to develop them as key advantages for their economies (Louis & Felice, 2009). Eco-innovations mostly derive from the sectors that are characterized as medium- to high-technology industries and provide environmentally sustainable products. Furthermore, countries with a high supply of high- tech products, especially in the manufacturing sector, have been recognized as important areas of economic, eco-friendly and sustainable growth in modern economies (Kohler et. al., 2014).

By exporting high-tech products, countries can reposition themselves on the international scale of development and achieve a higher level of eco-innovation performance (Kanda et. al., 2016). At the same time, while there are many factors that impact the international flow of technologies, the selection of products derived by high technologies represents a key opportunity for countries to define their

(20)

eco-19 | Master Thesis E. Kilipiri

innovation level of performance (Kanda et. al., 2016). The higher the quality of high-technology exports of a country, the better its eco-innovation performance. According the all the above, the first hypothesis is formed as follows:

H1: Technological development determined by high-technology exports is positively related with

eco-innovation performance at country level.

3.2 The moderating effect of Environmental Policies

Higher-income countries or developed countries are generally more oriented on supply-side instruments, such as technological capabilities, exports and advances, to support eco-innovation and prefer R&D support to enhance their eco-innovation performance (Horbach,2016). On the other hand, lower income or less advanced countries tend to rely more on demand-side instruments, such as policies and regulations (Jang et. al.,2015). According to Beltrán-Esteve & Picazo-Tadeo (2017), most of innovations consist of improvements from the adoption of technologies that were developed because economic incentives had to follow specific regulatory frameworks in order to be accepted within a country or Union of countries. For instance, Eastern European countries have to follow and adopt certain environmental regulation policies that imposed by European Union as a meeting requirement for their entrance and residency in the Union (Beltrán-Esteve & Picazo-Tadeo 2017). The above requirements can be explained by “the lower environmental technology standards accompanied with a high concentration of pollution-intensive technologies in the Eastern countries” (Horbach, 2016, pg. 2-3). In addition, the nature of innovation towards more sustainable technologies that has become eco-innovation had a parallel movement in the regulatory context (Leitner et. al., 2010).

Environmental policies expressed by regulations are among the main factors influencing the diffusion of eco- innovation and the improvement (or not) of performance (Louis & Felice, 2009). Several studies (Leitner et. al., 2010) predict that strict and/or many environmental policies stimulate innovation in a number of ways (e.g. first mover advantages created by the development of new technologies) and that there are ‘‘win-win’’ opportunities through environmental regulation, where pollution is reduced simultaneously with an increase in productivity. Porter and Van der Linde (1995a) argues that environmental regulation can trigger innovation.

(21)

When new incentives appear to regulate activities by lowering gas emissions and environmental impacts, countries, through their companies, have no other choice than to innovate to satisfy these regulations and keep their economy running (Beltrán-Esteve & Picazo-Tadeo, 2017) in order to be competitive and to improve their environmental or eco-innovation performance. If the development of technologies is caused by the application of strict environmental standards introduced by environmental policies, countries and industries, will be able to sell in the international markets and therefore export their technologies and products (Leitner et. al. 2010). As a result, the third hypothesis of this paper formulates as follows:

H2: The presence/introduction of environmental policies positively moderates the relationship between

technological development and eco-innovation performance at country level and vice-versa.

Figure 1. Proposed Research Model

Control Variables: 1. GDP per capita, PPP, 2. FDI –Net Inflows 3. Unemployment Rate

4. Methodology

This section presents author’s research design, while it describes the selected sample used in order to answer the research question of this Master Thesis. It elucidates the method and variables used for the description of the specific research and provides analytical information for the collection and analysis of the data. IV Technological Development DV Eco-Innovation Performance MODERATOR Environmental policies/ regulations

(22)

4.1 Selection and Description of Sample

The sample population of this research is based on developing countries and countries in transition phase that adopt and/or implement eco-innovation practices in order to improve their performance. The selected time period is 2005-2015. The selection of the specific time period is based on two main facts: firstly, the newer member states of EU, that joined the Union from 2004 onwards (Beltrán-Esteve & Picazo-Tadeo 2017), consist the representative sample of countries in transition phase (Eastern European Countries) (Horbach et. al. ,2012), and secondly, while “Japan internationally introduced its excellent experiences on the 3Rs (Reduce, Reuse, and Recycle) in waste management and proposed the 3Rs initiative during the G8 summit in 2004 (Jo et. al., 2015, pg. 12598), from 2005 most of the Asian countries use the 3Rs activities in order to improve their eco-innovation or environmental performance (Jo et. al., 2015).

Consequently, the starting year of this research is 2005, as the Asian countries of this sample represent the majority of developing countries, and at the same time it incorporates the countries in transition phase. Non-Asian and non-European countries are also included in this research sample as they consist developing or in transition countries. Japan is not present as an Asian country in this study as “it implemented eco-innovation practices/ national programs earlier than other Asian countries” (Jo et. al., 2015, pg. 12598).

The sample selection was determined by meeting all the following criteria: a) gross national income per capita - GNI per capita (Atlas Method- current US$, World Bank Database - World Development Indicators) in each country of this sample does not exceed the 24.710 US $ during the specific time period and b) valid data availability regarding the above time period (Eurostat 2015, UN/DESA, 2016; OECD, 2017). As a result, thirty-three (33) countries consist the final sample of this research. They are divided into two main categories according to the above mentioned criteria of selection: developing countries (Algeria, China, Egypt, Georgia, India, Indonesia, Jordan, Malaysia, Morocco, Philippines, Tanzania, Thailand, Tunisia and Vietnam,) and countries in transition (Albania, Azerbaijan, Belarus, Bosnia & Herzegovina, Bulgaria, Croatia, , Czech Republic, Estonia, Latvia, Lithuania, Poland, Republic of Moldova, Romania, Russian Republic, Serbia, Slovakia, Slovenia,

(23)

Turkey and Ukraine). By applying the mentioned criteria, this master thesis secures that countries of sample are comparable and can provide valid results (Ηorbach, 2016).

4.2 Selection and Description of Method(s)

In order to test the proposed hypotheses of this research model, a multiple hierarchical analysis using SPSS will be implemented. This type of analysis consists a valid way to examine and predict the impact of an independent variable to a dependent variable (Field, 2009). A panel data model for organizing the data of sample from 33 developing countries and countries in transition phase over the period 2005-2015 was used (Xie et. al., 2016).

Adopted by Nijhuis (2016), an equation, that tests the first hypothesis (the impact of country’s technological development on its eco-innovation performance) and examines the possibility of an effect on the relationship between environmental policies and eco-innovation performance at country level, is presented as follows:

𝑌it= 𝑎+𝑠it𝛿+𝑧it𝛽+𝜀it (1)

In the above equation, Y refers to the country’s eco-innovation performance, followed by a subscript i and t, which stand for the country and the specific year respectively (Nijhuis,2016). Moving to the rest of this equation, 𝑎 is the constant, s represents the independent variable (country’s technological development) and “the coefficient δ is added to consider the effect of the independent variable on the dependent variable” (Nijhuis,2016, pg. 27). The vector z represents the control variables (GDP per capita, FDI Inflows and Unemployment Rate) and the 𝜀 is the error term of the regression (Field, 2009).

By proceeding to the second hypothesis (hypothesis for the moderation effect) of this research a final equation will be used. The equation will include the moderating effect of environmental policies (introduced and active). In this equation, 𝑒 is the direct effect of environmental policies on country’s eco-innovation performance and 𝑒it𝑠it is the moderating effect of environmental policies on the independent variable, while the other variables remain the same as in the previous equation (1) (Nijhuis,2016):

(24)

𝑌it= 𝑎+𝑠it𝛿+𝑧it𝛽+𝑒it𝜃+𝑒it𝑠it𝜇+𝜀it (2)

Finally, R² is used to analyze and explain the percentage of each model (according to the entered variables) in the variance of dependent variable. The R² value can be between 0% and 100% (Nijhuis,2016). A R² value that is closer to 100% explains more of the variance of the dependent variable and has more significant fit with the model (Field, 2013).

4.3 Description of Variables 4.3.1 Dependent Variable

Eco-innovation performance: In order to measure the dependent variable, eco-innovation performance

is translated by the indicator of ISO Certifications 14001 adopted both from EU Eco-innovation scoreboard and Global Eco-Innovation Scoreboard (see APPENDIX I). For reasons of data availability, this research uses only the number of ISO Certifications 14001 per country and during the studied period between 2005-2015. Certified Environmental Management Systems (EMS) such as ISO 14001 enhance the introduction of eco-innovations as they help companies to establish environmental rules and programs for higher and stronger eco- performance (Bernauer et. al.,2006). This indicator is directly related with country’s eco-innovation performance “as it is aggregated from company level data in order to be explain country level performance” (Eco-Innovation Observatory, 2016, pg. 35-37).

4.3.2 Independent Variable

Level of country development: The technological capacity/capability of a country is among the factors

that determine the level of country development. Usually, higher-income countries use to rely on supply-side instruments (technology push & R&D) to support eco-innovation while “less advanced countries tend to rely more on demand-side instruments” such as regulations (Bernauer et. al.,2006, pg. 7). However, in this case, R&D expenditures on country level won’t be used as indicator of technological capacity as they lack of valid data for the examined countries and the specific time-period. As a result, level of country development will refer to country’s technological capabilities measured by high-technology exports (% of manufactured exports). It is admitted that exports are really important for a country considered as a driving force of technological catch-up and further development (Kohler

(25)

et. al. 2014).

In addition, according to UNDP Technology Achievement Index (UNDP, 2001), one pillar for technology achievement is based on the diffusion of newest technologies represented by medium- high technology exports (Archibugi & Coco, 2005). Using medium or high-tech exports, there is a better correlation between level of country development and eco-innovations/ eco-innovation performance. The higher the value of this relationship, “the stronger the economy is shaped by the demands from abroad” (Kohler et. al. 2014, pg. 140).

4.3.3 Moderator Variable

Environmental Policy instruments defined as new environmental laws- treaties- COP decisions

(adopted and active): Porter and van der Linde (1995a) stated that the relationship between regulation

and eco-innovations is a “win-win” process. Rennings (1998) observed that legal compliance has a significant effect on eco-innovation as the first engages innovation goals for firms and leads to a high eco-innovation performance in country level.

Furthermore, a country is able to achieve high green competitive advantage due to the effects of regulations on eco-innovations in long term period of time (Constantini & Mazzanti, 2012) and on country’s level of development (Horbach et. al. 2012). In the specific research design, the number of each country’s environmental regulations and legislations, that promote eco-innovation and generally influence country’s level of development in terms of technological exports, are used as moderator variable in order to test the relationship between level of country development and eco-innovation performance for each time phase of the examined period 2005-2015 (Jo et. al., 2015).

4.3.4 Control Variables

After the analysis of the main variables, three variables are controlled in order this research to avoid any additional effects on the examined hypotheses/ relationships. The first control variable refers to Gross Domestic Product (GDP) per capita based on purchasing power parity (PPP), as it represents the

real GDP per capita of a country. GDP indicator is an economic indicator that refers to the economic growth of a country and its performance. As a result, it is expected that this indicator has an impact on

(26)

country’s eco-innovation performance (Reid & Miedzinski, 2008).

Foreign Direct Investment (FDI) is the second control variable in this study and refers to net

inflows as a percentage of GDP. Jaffe et al. (1995), have presented many indicators of competitiveness and performance at country level, such as net exports and the amount of foreign direct investment (FDI). Furthermore, there is a significant effect of FDI on the adoption of green process innovation and on eco-innovation performance (Guoyou et. al. 2013).

Country’s Unemployment Rate consists the last control variable of this research model and it is expressed as percentage of total labor force. Eco- innovations can have both a positive and a negative influence on employment rates. They can either increase the need of workers in eco-innovative industries (or generally industries) or reduce the labor demand because of technological advancements (Pfeiffer and Rennings, 2001). As a result, the overall country’s productivity is affected by high employment or unemployment rates. This leads to high or low overall performance, and eco-innovation performance (Kunapatarawong &Martínez-Ros, 2016).

Table 1: Summary of Variables

Variable Description Source

Level of country

Development measured as High- Technology Exports ( % of manufactured exports)

High-technology exports are

products characterized by high R&D intensity (World Development Indicators - World Bank)

Data from database: World Development Indicators - World Bank Data retrieved in March 2017

Eco-Innovation Performance (measured as ISO

Certifications 14001)

Number of ISO Certifications 14001 per year and country

Adopted by ISO Survey of certifications to management system standards

Environmental Policies Number of NEW Environmental Policies/Regulations per country { laws- treaties- COP decisions ( active and adopted)}

Adopted by ECOLEX Database (Joint initiative of IUCN, UNEP, FAO) Gross Domestic Product

(GDP) per capita, PPP (current international $)

GDP per capita, PPP (current international $)- GDP per capita based on purchasing power parity (PPP).(World Development

Indicators - World Bank Database)

Foreign Direct Investments (net inflows, % GDP)

Foreign direct investments represent the net inflows of investment in an enterprise operating in an economy other than that of the investor (World Development Indicators - World Bank)

(27)

Unemployment Rate, total (% of total labor force) (modeled ILO estimate)

Unemployment rate refers to the share of the labor force without work but available for work and seeking employment. (World Development Indicators - World Bank Database)

International Labour Organization, ILOSTAT database and World Development Indicators, World Bank Database- Data retrieved in March 2017.

4.4 Data collection

Different databases were used in order to obtain the secondary data of all variables. Data from World Bank’s database (option of World Development Indicators) were selected for the independent variable1 and the three control variables2. ECOLEX Database3 was used as the source of data for moderator variable, while ISO Survey of certifications to management system standards4 was used to determine the dependent variable in the proposed research relationships.

5. Analysis and Results

After analyzing all the variables in details, the results of the proposed research model and their analysis are presented. Firstly, the analysis of descriptive statistics of all variables before and after normalization of data presented on Appendix II is discussed in order to meet the assumption of normality proceeding to a regression analysis without bias or misleading conclusions. Secondly, Table 2 presents the means, standard deviations and correlations of tested variables. Finally, Table 3 shows the regression and moderation results adopted through SPSS output.

For testing assumption of normality, the statistic of skewness and kurtosis were examined. As it became obvious in the first Descriptive Statistics’ output (see Appendix II), the statistic of skewness and kurtosis were not following the rule of validity of ±1 values for almost all the variables indicating that the data of each variable is not distributed normally. As a result, after using data normalization method, a second output (see Appendix II) presented the new skewness and kurtosis statistic of data.

1_{Available at:}_{http://databank.worldbank.org/data/reports.aspx?source=2&series=TX.VAL.TECH.MF.ZS&country} 2_{Available at:}_{http://databank.worldbank.org/data/reports.aspx?source=2&series=NY.GDP.PCAP.PP.CD&country}_,

http://databank.worldbank.org/data/reports.aspx?source=2&series=BX.KLT.DINV.WD.GD.ZS&country , http://databank.worldbank.org/data/reports.aspx?source=2&series=SL.UEM.TOTL.ZS&country

3_{Available at:}_{https://www.ecolex.org/}

(28)

The first five variables (High Technology exports, ISO Certification 14001, Environmental policies, FDI Inflows and GDP per capita PPP) follow a normal distribution having the values inside the ±1 valid values for normality.

The variable of employment rate is slightly over the valid value of +1, but it is accepted as it consists a control variable and does not impact in large scale the further steps of data analysis through SPSS. Furthermore, the testing sample of 363 observations presented a decrease because of two specific reasons: i) in the first Descriptive Statistics output (see Appendix II), the variable of High-Tech Exports presented missing data in 10 observations and ii) in second Descriptive Statistics output (see Appendix II), the removal of outliers for data normalization led to the final testing sample of 293 observations. For the above mentioned reasons, this research used the sample of 293 observations to test its hypotheses and to lead into conclusions.

Table 2 indicates the correlations between examined variables of the research model. The number of ISO certifications 14001(dependent variable) is significantly and positively related with annual percentage of high technology exports (independent variable) at country level (r =.494, p<.01)

(Field, 2009, pg. 166-179). Environmental policies (moderator variable) are negatively related with the annual percentage of high technology exports, have small effect on the above relationship (r = -121, p<.05) and at the same time, they don’t present any significant relationship with the number ISO certification 14001, indicating no effect between these two variables (r = 0,002).

Table 2. Means, Standard Deviations, Correlations

Variables MD SD 1 2 3 4 5 6

1. High- technology exports 0,7413 0,51326 1

2. ISO-Certifications 14001 2,4961 0,94461 0,494** 1

3. Environmental Policies 0,4963 0,35209 -0,121* 0,002 1

4. GDP per capita (PPP) 114,3895 33,65260 0,185** 0,433** 0,057 1

5. FDI Inflow 8,9414 1,22145 0,825** 0,827 ** -0,099 0,296* 1

6. Unemployment Rate 8,8909 5,62786 -0,340** -0,234** 0,263** 0,050 -0,372** 1

**. Correlation is significant at the 0.01 level (2-tailed). *. Correlation is significant at the 0.05 level (2-tailed).

After testing all the assumptions for conducting an unbiased regression analysis (Field,2013), a hierarchical multiple regression was used in order to predict the influence of high technology exports

(29)

on eco-innovation performance calculated by the number of ISO Certifications 14001 at country level of study and to examine if the number new environmental policies per year moderates/impacts the above mentioned relationship.

Table 3. Multiple Hierarchical Regression Results for GDP per capita (PPP), FDI Inflow, Unemployment Rate, Environmrntal Policies & High Technology Exportsa

Model 1 Model 2 Model 3 Model 4

GDP per capita (PPP) 0,197** 0,194** 0,162** 0,164**

FDI Inflow 0,788** 0,789** 1,247** 1,244**

Unemployment Rate 0,050 0,034 0,024 0,023

Environmental Policies 0,060 0,043+ _0,065+

Main Effect -0,551** -0,524**

High Technology Exports

Moderating Effect

High Technology Exports X Environmental Policies -0,035 R2 _0,725*** _0,729+ _0,824*** _0,825 Adj. R2 _0,723 _0,725 _0,821 _0,821 ΔR2 _0,725 _0,003 _0,095 ₀ F 254,531 193,495 269,155 224,024

Note. Statistical significance: +p<.10, *p <.05, ** p <.01, ***p <.001

a _{n= 293}

Models 1 ,2 3 and 4 of Table 3 represent the multiple hierarchical regression results for testing eco-innovation performance (measured as number of ISO Certifications 14001) at a country level. Model 1 includes the control variables. As a first step, the variables of GDP per capita, FDI Inflows and Unemployment Rate were entered, while ISO Certification variable (depended variable) remain constant in all four models. This model presented statistical significance F (3, 289) = 254.531; p< .001 and explains 72.5% of variance in country’s eco-innovation performance. In other words, the three controls variables influence country’s eco-innovation performance with 72.5% while the rest 27.5% is affected by other factors (Field, 2009). In Model 2, the variable of environmental policies, as a moderator variable, was entered in order to examine the level of its influence on dependent variable if all the control variables are held constant. The model was statistically significant F (4, 288) = 193.495; p< .001. The introduction of environmental policies explained 72.9% variance in in country’s

(30)

eco-29 | Master Thesis E. Kilipiri

innovation performance (R2 Change = .003; F (1, 288) = 0.060; p<.10), while the control variable remained constant. The next model (Model 3) presents the entrance of independent variable and its effect on country’s eco-innovation performance. Model 3 was also statistically significant F (5,287) = 269.155; p< .001 and it was able to explain 82.4% of variance in country’s eco-innovation performance and contained more significant values than the other two models.

The final model examines the hypotheses of this thesis’ research as the moderation effect has now entered too. Having statistical significance (F (6,286) = 224,024; p< .001), Model 4 has not any extra contribution on the variance in eco-innovation performance and presents zero change of R square. Furthermore, by observing the final model (Model 4), it is obvious that high technology exports affect country’s eco-innovation performance (β = -0.524, p< .01). In consequence, this result leads us to reject H1 (there is a positive relationship between country’s high technology exports and eco-innovation performance) by saying that if high technology exports in a country increase for 1, its eco-innovation performance will decrease for 0.524. In addition, if GDP per capita (PPP), FDI Inflow and Environmental Policies are tested separately in the same model, each of them presents a positive relationship with country’s eco-innovation performance.

On the other hand, the results indicate that there is no significant relationship between country’s high technology exports and eco-innovation performance, when this relationship is moderated by the number of new environmental policies (introduced and active) in a country (β = -0.035, p = 0.464). For the specific reason, H2 is also rejected as there is no significant result neither able to prove a moderation effect nor a positive impact of the moderator on the relationship between high-technology exports and eco-innovation performance at country level.

6. Discussion

The aim of this research was to explore and analyze the relationship between technological development and eco-innovation performance at country level. The influence of environmental policies was also examined as previous studies had proposed the significant relationship of environmental policies with the level of country development and the eco-innovation performance.

(31)

30 | Master Thesis E. Kilipiri 6.1 Findings

Generally, countries, by presenting a high number of companies that are ISO 14001 certified, have firstly developed and enhanced their technological capabilities to achieve better performance (Peñasco et. al. 2017). At the same time, trade openness helps countries to reach a higher level of innovation and performance (Constantini & Mazzanti ,2012), Export is considered an important mean for the diffusion of technologies and for the creation of socio-economic and environmental benefits (Kanda et. al. 2016). However, the results of this research have presented that a strong negative relationship exists between high technology exports and eco-innovation performance expressed by number ISO Certifications 14001. In details, if high technology exports of a country increase within a year, the number of ISO Certifications 14001 will decrease almost at 30%.

The above situation can have several possible explanations. Ziegler and Nogareda (2009) and Heras-Saizarbitoria et al. (2013) found no clear evidence that eco-innovation performance (and general performance) increases after certification, which indicates that if a country presents a high number of ISO Certification 14001, it doesn’t clearly mean that has a higher eco-innovation performance. Moreover, as ISO 14001 is a standard that emphasizes on processes and how they can provide better environmental impact without considering the outcomes derived from environmental and eco-innovation performance (Arimura et al., 2016). As a result, the increased percentage of high technology exports cannot explain only by itself the decrease of adoption of ISO Certifications 14001.

Other possible reasons such as a knowledge gap, aversion to risk in capital markets, and an inadequate governmental support to foster the performance of a country might play intermediate roles in the relationship between high technological exports and eco-innovation performance (Aguilera- Caracuel & Ortiz-de-Mandojana, 2013). In addition, the motivation for certification is a crucial factor of influence for the above mentioned relationship (Constantini & Mazzanti 2012). Riilo (2017) has indicated that companies do not always obtain environmental certifications only to improve their eco-innovation/environmental performance. In other words, there is a gap in the literature regarding the real reasons of the implementation of Environmental Management Systems (Huang et.al.,2016).

(32)

According to Horbach (2008) there is a significant influence of eco-innovation performance on the relationship between regulation and technological development. This research tries to prove that environmental policies (expressed by environmental regulations) acts as a moderator between technological development and eco-innovation performance. In general, several studies have expressed the contrary opinions regarding the debate about the influence of environmental regulation on eco-innovation performance and competitiveness (Triebswetter & Wackerbauer, 2008).

The majority of studies support that the stricter and more the environmental policies, the higher the eco-innovation performance of a country (Leitner et. al., 2010). Porter and Van der Linde (1995a;1999b) suggested that companies innovate as they want to increase their resource productivity and they are forced by environmental and technological process. In this situation, regulation acts as a driver of fostering innovation giving the right guidelines to achieve resource productivity and higher performance (Jaffe et al., 1995). On the other hand, the traditional, neoclassical cost-based approach suggests that strict environmental regulation leads to increased costs and as a consequence, it decreases competitiveness and productivity through the compulsory and forced by law environmental activities (Palmer et al., 1995).

However, this research neither supports the “win-win” approach of environmental regulation and performance nor the mentioned cost-based approach. In fact, the results show a non at all significant moderation of environmental policies/regulations on the relationship between technological development (high technology exports) and eco-innovation performance. The explanation is laid on the fact that it is still unclear how and to what extent the choice of policy instruments regarding the environmental protection essentially affects innovation, technological development and performance (Jaffe et al., 1995). Incomplete information and complexities derived by the dynamics of competition for technological opportunities do not permit to environmental regulations to prove their significant level of influence of the examined relationship of this study (Leitner et. al. 2010).

Moreover, the development and diffusion of new technologies cannot be often supported by environmental regulations as the latter have been developed to promote the existing “traditional” technologies. So there is a miss-match between new technologies (or high technological products) and

(33)

existed environmental policies, leading to lack of sufficient information that supports the examined relationship (Leitner et. al. 2010). At the same time, as within countries, many variations also exist regarding their levels of development, the utilization of different types of environmental policies, regulations and standards leads to different levels of ISO Certifications 14001 that countries adopt for their eco-innovation performance according to their needs (McGuire,2014). In conclusion, Li (2014) has proved that the effect of environmental regulations on technological development and eco-innovation performance is not always straightforward because of the existence of several other determinant factors such as economic development, national resources and country’s openness. As a result, sometimes there is no obvious influence of environmental policies on technological development and eco-innovation performance at country level of study.

6.2 Academic Relevance and Managerial Implications

The relationship among country’s eco-innovation performance, technological development and environmental policies has been developed in order to provide new evidence and knowledge to the existed academic literature, which has been flourished with new evidence regarding the research for developing and in transition phase countries. Moreover, the above relationship has been explored and analyzed as a further step of research proposed by Ramanathan et. al.’s (2010) study for analyzing the relationship of environmental policies and eco-innovation performance expressed by ISO Certifications 14001.

In addition, this research is focused at a country level of study and consequently, international organizations and governors of countries can gain more information and knowledge presented by the results of this study. At the same time, the results and relevant information of this Master Thesis can have also managerial implications as companies are really dependent on regulatory and other pressures within a country, while they want to boost their international experience (Kanda et. al., 2015). As a result, managers that operate inside- outside of developing and in transition countries, or they want to cooperate with other firms from these countries, they can make use of all the information and results derived from this study.