The economic benefits of early green innovation
Evidence from the automotive sector
The economic consequences for firms investing in green innovation, and therefore their
incentives to innovate, are not well understood. This paper empirically assesses the
economic returns on innovation in cleaner vehicles. The analysis uses data on passenger
car market shares and patents for car manufacturers operating in eight countries for
the period 2005-2021. The results show that, when vehicle fuel prices increase, firms
having previously successfully filed patents related to both electric and hybrid vehicles
and fuel efficiency experience an increase in their market share. This increase takes
place between 7 and 8 years after the patent stock is accumulated for patents related
to electric and hybrid vehicles and between 8 and 15 years for patents related to
fuel efficiency. The analysis also finds that in contexts where fuel price salience
is high, price increases generate larger and earlier competitiveness returns for firms
having previously invested in cleaner technologies.
Published on February 22, 2023
In series:OECD Environment Working Papersview more titles