Green Innovation and Firm Efficiency: The Role of Institutional Quality in Italian High‐Tech Manufacturing Sectors

ABSTRACT The aim of this research is to verify whether institutional quality affects the relationship between green innovation and firm efficiency within the high‐tech manufacturing sectors. To estimate jointly the parameters of a stochastic frontier and the coefficients of a model explaining technical inefficiency, we employed the one‐step estimation procedure proposed by Belotti and Ilardi (2018) on data taken from the Orbis database provided by Bureau van Dijk. The empirical evidence shows that institutional quality plays a crucial role in shaping the relationship between green innovation and firm efficiency. In particular, the results highlight that government effectiveness and regulatory quality are the main moderating factors. Moreover, the empirical findings show that the beneficial impact of green patents on technical efficiency is higher for micro‐firms, even though the impact of green innovation on micro‐firm efficiency appears to be more sensitive to the other two specific dimensions of institutional quality, namely, the efficiency of the judiciary system and social capital.