Eco-innovation and Regulatory Push/Pull Effect in the Case of REACH Regulation: Empirical Evidence from Survey Data

Numerous theoretical and empirical studies demonstrate a positive correlation between eco-innovation and environmental regulation. However, only few analyses explain how environmental policies drive eco-innovation. This paper attempts to fill this gap by studying eco-innovation-friendly mechanisms in the way that the European REACH (Registration, Evaluation, Authorization of Chemicals) regulation has been designed. The aim of REACH, which went into effect in 2007, is "to ensure a high level of protection of human health and the environment while improving competitiveness and innovation", which makes it an appropriate subject for analysing the relationship between environmental regulation and eco-innovation. The primary contribution of this paper is the explanation of how regulation encourages eco-innovation. The study uses data from a unique original survey that identifies innovation-friendly mechanisms in relation to the push/pull effect of regulation on environmental innovations. Our results demonstrate the following: (1) The process of authorization and the obligation to transmit information through the supply chain play an important role in “pushing” eco-innovation. This finding stresses the importance for policy makers to promote new "green knowledge" to encourage eco-innovation. (2) Extending responsibility has a significantly positive effect on "pulling" eco-innovation. (3) Only well-designed instruments that are appropriate to the techno-industrial and institutional contexts in which they will be applied lead to innovation.