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Productivity, capital intensity, and ISO 14001 adoption: Theory and evidence
Author(s) -
Ni Bin
Publication year - 2019
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12547
Subject(s) - incentive , productivity , capital intensity , economics , robustness (evolution) , industrial organization , phenomenon , microeconomics , empirical evidence , capital (architecture) , business , macroeconomics , profit (economics) , history , biochemistry , chemistry , physics , philosophy , archaeology , epistemology , quantum mechanics , gene
The determinants of ISO 14001 adoption have been considered to fall into two categories: external pressure from environment‐oriented stakeholders or customers and internal need due to expected future benefits. In this study, we further elaborate the mechanism underlying firms’ adoption of the standard by investigating the inter‐relationship among firms’ productivity, capital intensity, and decision making regarding adoption. Applying a general equilibrium model, we show that under optimal conditions, highly productive firms can benefit more from adoption. Moreover, technological advancements potentially drive up firms’ capital intensity and this positively affects their incentive for adoption. The empirical practice using firm‐level data in Vietnam verifies our predictions with robustness. In addition, we find that the phenomenon outlined above becomes even more obvious in the manufacturing sectors.