Abstract:

Environmental problems and the solutions investigated within the economic theory has been high on the global agenda since 70s. Variables that encourage firms to innovate and/or use environment-friendly technologies is an important subtitle in this issue. According to the common definition in the environmental economics literature, eco-innovation consists of new or modified processes, techniques, systems and products to avoid or reduce environmental damage. Although there are a lot of variables that determine the eco-innovation level of a firm, national and international environmental policy –as one of them- worths significantly noting. Under some conditions, the stringency of environmental regulations induces firms to reduce their costs by innovating new environment-friendly technologies. Therefore, environmental regulations may lead a so-called “win-win” situation characterized by both cost reducing/profit maximizing behaviour of the firm and environmental benefits. On the other hand, international harmonization of environmental regulations may create a comperative advantage for the eco-innovationg firms in the newly innovated technologies and strengthen this “win-win” situation. Market structure, technological capabilities, awareness and pressures of the demanders for cleaner technology are the other variables which determine the eco-innovation level of a firm. This study has concentrated on the variables that determine eco-innovation level of a firm. Both endogenous and exogenous variables are analysed in detail. As a consequence, it has been found that (1) the effect of environmental regulations on eco-innovation should be emphasized diligently, (2) international harmonization of environmental regulations supports eco-innovation, and finally (3) increasing awareness of society about environmental issues may be influent on ecoinnovation.  

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