Environmental investment and firm performance: A network approach

- We use a network DEA model to account for intertemporal environmental investment decisionsin measures of firm productivity.
- We apply our network technology model to a panel of firms in Sweden's pulp and paperindustry for the years 2002 - 2008.
- We model environmental investments and expenditures separately from other productionoriented inputs.
- We find evidence of positive relationships between energy efficiency, environmental performance, and firm productivity.

This study examines the role of investment in environmental production practices for both environmental performance and energy efficiency over time. We employ a network DEA approach that links successive production technologies through intertemporal investment decisions with a period by period estimation. This allows us to estimate energy efficiency and environmental performance separately, as well as productivity change and its associated decompositions into efficiency change and technology change. Incorporating a network model also allows us to account for both short-term environmental management practices and long-term environmental investments in each of our productivity measures. We apply this framework to a panel of detailed plant-level production data for Swedish manufacturing firms covering the years 2002-2008.