The Impact of Governmental Regulations and Environmental Activities on Innovation Efficiency

Innovation efficiency plays a key role in ensuring that sustainability efforts are implemented effectively and yield maximum benefits. This study emphasizes the impact of government regulations and environmental resource-saving approaches on innovation efficiency. Within this study, environmental resource-saving approaches include activities against air pollution, water pollution, energy consumption, waste, and hazardous substances. By analyzing data from 1196 German companies statistically, this study examines the importance of governmental and legal regulations as well as engagement in environmental activities for green innovation. The findings reveal that companies prioritizing regulations and environmental practices achieve higher innovation output from the same innovation input than other firms, leading to improved innovation efficiency. In a developed country, companies focusing on sustainability aspects exhibit a higher level of innovation efficiency. For them, embracing regulations and environmental practices are firm resources that raise the possibility of competitive advantage. Companies embracing these aspects hence contribute to both their own success and the well-being of the environment.