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The debate on flexibility of environmental regulations, innovation capabilities and financial performance: a novel use of DEA

  • Ram Ramanathan
    ,
  • Usha Ramanathan
    ,
  • Yongmei Bentley
Research Output:
Contribution to journal
Article
 Peer-review

Open access

Abstract

Operational research models have been employed to understand development issues associated with environmental sustainability. This article describes a novel application of Data Envelopment Analysis (DEA) to help extend a specific debate in the literature on Porter’s hypothesis in environmental policy. The debate deals with the impact of flexibility of regulations on the relationship between innovation capabilities on financial performance in organisations. Using the resource based view of a firm, we hypothesise that relationship between innovation capabilities and financial performance in firms depends on how flexible or inflexible environmental regulations are. We apply DEA to capture the flexibility of environmental regulations. Our results indicate that innovation capabilities significantly influence financial performance of firms if firms feel that the environmental regulations they face are flexible and offer more freedom in meeting the requirements of regulations. On the other hand, corporations that feel that they face more inflexible regulations are not so effective in improving their financial performance with their innovation capabilities.

Publication Information

Output type

Research Output:
Contribution to journal
Article
 Peer-review

Original language

English

Pages from-to (Number of pages)

Pages 131-138

Journal (Volume, Issue Number)

Omega (United Kingdom) (Volume 75)

Publication milestones

  • Accepted/In press - 23/02/2017
  • Published - 27/03/2017

Publication status

Published - 27/03/2017

ISSN

0305-0483

Publication IDs

  • handle.net: 10547/622177
  • Scopus: 85016509144

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