A new insight into environmental innovation: Does the maturity of environmental management systems matter?

- We scrutinise how the maturity level of ISO 14001 influences environmental R&D.
- Using Japanese facility-level data, two Tobit models are estimated.
- In the models, we address the potential endogeneity problem.
- The facilities with improved ISO 14001 are likely to invest in environmental R&D.
- The maturity of ISO 14001 is an important factor to encourage environmental R&D.

Technological innovation has recently become more essential than ever. To examine the factors that might induce environmental technological innovation, we focus on ISO 14001, a voluntary approach to environmental management, and scrutinise how the proficiency or maturity level of ISO 14001 in facilities influences environment-related research and development (R&D) expenditures that promote environmental technological innovation. We measure the maturity level based on the length of time since a given facility adopted ISO 14001. Using Japanese facility-level data from “Environmental Policy Tools and Firm-Level Management and Practices: An International Survey” (OECD Survey), we estimate two Tobit models by addressing an endogeneity issue in ISO 14001. The estimation results provide empirical evidence that as the ISO 14001 is improved in facilities, those facilities are likely to spend more on environmental R&D. The facility age and market concentration also positively affect environmental R&D. These findings suggest that the maturity level of ISO 14001 is an important factor influencing the investment in environmental R&D.