One, Two, Three : How Many Green Patents Start Bringing Financial Benefits for Small Medium and Large Firms?

This paper studies the relationship between environmental innovations and firms’ financial performance from the perspective of environmental activism intensity. We explore how the number of green patents (GP) affects the financial performance of small, medium, and large firms and whether the growing number of GP positively affects firms’ financial performance. We employed a panel data sample of 1136 firms-green patent holders and 2395 firms with no such patents from the USA and Europe and directly compared their financial results. The results show that on average small firms benefit financially only in the second year after the first GP implementation. Medium-sized firms enjoy improved financial performance in the first two years after the first or the second GP implementation, however, the third GP does not anyhow improve the financial performance. Large firms gain financial benefits every year over a three-year period after issuing GPs regardless of their quantity. Generally, the increase in financial performance is moderate in the first year, reaches the maximum in the second year, and becomes statistically insignificant in the third year after the last GP’s implementation