Environmentally oriented innovative strategies and firm performance in services. Micro-evidence from Italy

This paper aims at analysing the impact of environmentally oriented innovative strategies on firms' economic performance in terms of employment, turnover and labour productivity growth. We exploit a unique dataset of 773 Italian service firms with 20 or more employees, based on 1993-1995 Community Innovation Survey (CIS) II data on innovation strategies and 1995-1998 System of the Enterprise Account (SEA). Using a Gibrat-like empirical model, our findings show a negative link between environmental motivations and growth in employment and turnover in the short term, which then associates to a not significant or even negative effect on labour productivity growth, a result which is explainable by various factors: non-mature markets; early movers that need more time to grasp the benefits of innovative actions; weaknesses of some service branches. The effect on employment is in part compatible with the existing evidence and may be based on efficiency improvements (dematerialisation processes), which also impact on efficiency by reducing workforce numbers. The effect on turnover of environmental innovation strategy is negative, implying either a short-medium effect, possibly balanced in the long run by net benefits in terms of higher added value, or a real negative impact, which may be contingent on the period of observation, when environmental strategies where not at the heart of strategic management policies. Neither Porter-like effects nor virtuous circles among environmentally strategies and performance seem to be present, at least in the short run and for services firms, calling for the necessity of further analyses on medium- long-term effects and performances of specific service branches. Though effects on performances could turn out positive in the long run when mature green markets and investments provide their benefits, our evidence highlights that services could still find hard times in tackling the well-known low productivity 'disease' even in the environmental realm.