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

Ramanathan, R., Ramanathan, U. ORCID: 0000-0002-7473-4643 and Bentley, Y., 2017. The debate on flexibility of environmental regulations, innovation capabilities and financial performance - a novel use of DEA. Omega. ISSN 0305-0483

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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.

Item Type: Journal article
Publication Title: Omega
Creators: Ramanathan, R., Ramanathan, U. and Bentley, Y.
Publisher: Pergamon Press
Date: 27 March 2017
ISSN: 0305-0483
Identifiers:
NumberType
10.1016/j.omega.2017.02.006DOI
Divisions: Schools > Nottingham Business School
Depositing User: Jonathan Gallacher
Date Added: 07 Apr 2017 10:45
Last Modified: 09 Jun 2017 14:14
URI: http://irep.ntu.ac.uk/id/eprint/30495

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