Green tangible investment strategies and export performance: A firm-level investigation

- We assess the indirect effect of green tangible investment strategies on export performance.
- Reducing environmental impact and increasing revenues increase TFP and then exports.
- Green tangible investment strategies allow firms to enter strictly regulated foreign markets.
- Evidence leads to a 'green-based' explanation of the firm heterogeneity hypothesis.

In this paper we empirically investigate the relationship between investments in environmentally oriented equipment and firms' export performance. We adopt a two-stage model where we first estimate the impact of green tangible investment strategies (GTIS) on the level of productive efficiency (TFP), and then assess whether induced productivity influences the propensity and the intensity of exports. We rely on a rich firm-level dataset on Italian manufacturing. Our results show that firms with higher productivity, induced among other factors by green investments combining environmental and increased revenue objectives, achieve a higher export performance. In particular, GTIS-enhanced TFP affects the probability of exporting in foreign markets characterized by more stringent environmental regulation. Our evidence supports a 'green-based' firm heterogeneity argument.

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