Environmental performance, manufacturing sectors and firm growth: structural factors and dynamic relationships

This paper investigates the correlation between sectoral environmental performance and firm growth, using a large data set of 61,219 Italian manufacturing firms and sector environmental–economic accounts. Specifically, the paper investigates the extent to which the correlation between (past) emissions intensity and environmental regulation influences firms’ economic growth. Our results show a trade-off: structurally, higher emissions intensity gives firms more freedom and relaxes the constraints on growth. This is a trade-off which rejects our hypothesis that economic and environmental performance might dynamically be positively correlated. However, although lower emissions intensity does not pay in terms of promoting turnover, there seems to be a non-linear relation characterising the economic growth–environmental performance relationship. Transforming the prevalent trade-off in a possible joint dynamics in which poor environmental performances hampers firm growth and investment in greener technologies might be associated with positive economic performance, thus becomes possible.