4.2 Variable definitions
In order to measure profitability variable for the model, the
proxy chosen is the 2008 pre-tax returns on sales. The data was collected from
firms with seven ordered categories with determined thresholds.
The definition of the dependent variable is inspired from
Cearnitzki & Kraft (2008): The starting point will be from the well-known
profit equation:
Profit = Sales-Labour cost-Capital cost-Material cost ... (1)
Next step is to divide the two sides of the equation by sales in
order to get the profit margin:
|
fit _ Sales--Labou r c ost--Capital c ost--M aterial c
|
... (2)
|
|
|
If one considers the unit Marginal Cost (MC) is equal to the
Average Cost (AC) in the long run then the equation (2) may be written as
follow:
... (3)
p and q being respectively the price and the quantity of
output.
According to the authors the methodology followed is the price
cost-margin, they add «the capital costs have been subtracted and need not
to be taken into account by capital divided by sales as an explanatory variable
in the empirical model» (Cearnitzki & Kraft 2008).
To explain return on sales they propose concentration in the
industry and market share arguing that one would expect a greater return on
sales in market with high concentration since firms can price at high levels.
Moreover they expect firms with high market shares to be more efficient and
thus earn higher return on sales. This methodology returns to what was treated
previously in the theoretical part concerning the effect of ecoinnovation on
competitiveness. Therefore, Environmental Innovation (EI) will be considered as
the main explanatory variable and the model will test whether it has a positive
or negative impact on return on sales as an index of competitiveness.
To do so, the definition of the explanatory variable EI will
follow the same methodology as the one used by Rammer & Rexhauser (2011),
where the authors defined EI as «product, process, marketing or
organizational innovations that lead to a significant reduction of
environmental burdens.» Rammer & Rexhauser did not distinguish between
the ecoinnovations which aim explicitly to diminish the environmental
externalities and the ones that are rather «a by-product of
innovations». The definition includes the environmental benefits at both
the firm and consumer level. Also there is no distinction between the new
technologies developed by the firm that are absolutely novel for the market as
whole or only the new use of existing technology by the firm. They argue that
«the rationale behind this view of innovation is that firms can hardly
distinguish whether a new used abatement technology is novel to the whole
market or only novel to the firm.»
The MIP differentiates between 12 distinct environmental
innovations whereas the harmonised CIS survey contains only nine dimensions.
Rammer & Rexhauser (2011) determine which dimensions are processes
innovations and which ones are products innovations.
Dimensions of Environmental Innovation Distinguished in MIP
2009
|
DIMENSION OF ENVIRONMENTAL
BENEFITS
|
SHARE IN
SAMPLE
|
TYPE OF ENVIRONMENTAL
INNOVATION
|
|
EFFICIENCY
IMPROVING
|
EXTERNALITY REDUCING
|
|
PROCESS INNOVATION
|
|
Reduced material use per unit of output
|
35.12 %
|
X
|
|
|
Reduced energy use per unit of output
|
40.82 %
|
X
|
|
|
Reduced CO2 emissions
|
32.16 %
|
-
|
X
|
|
Reduced other air emissions
|
22.86 %
|
-
|
X
|
|
Reduced water pollution
|
22.13 %
|
-
|
X
|
|
Reduced soil pollution
|
14.36 %
|
-
|
X
|
|
Reduced noise burden
|
23.22 %
|
-
|
X
|
|
Replaced materials with less hazardous substitutes
|
22.90 %
|
-
|
X
|
|
Improved recycling of materials, water, waste
|
35.44 %
|
-
|
X
|
|
PRODUCT INNOVATION
|
|
Reduced energy use for the customer
|
35.21 %
|
X
|
|
|
Reduced air, water, soil, noise pollution
|
27.64 %
|
-
|
X
|
|
Improved recycling of product after use
|
23.59 %
|
-
|
X
|
Table1: (Rammer & Rexhauser, 2011)
The main independent variable EI is used according to the
definition of Rammer & Rexhauser (2011); They authors explain in their
article that the data was collected according to the rating of asked companies
on a four grade scale from no environmental benefit to high environmental
benefit. Also, they pointed out the relevance of the variable measuring for the
«expected impact of energy saving product innovation on
profitability». They added «Although external to the firm, energy
efficiency of products could be rewarded by the market since it directly
reduces user costs and therefore could lead to higher profitability.» For
this purpose a dummy variable is created the following table will further
explain the functioning mechanism of certain relevant variables for the model.
The same logic is followed to measure for environmental innovations introduced
during the past year. In order to inspect he hypotheses of the model the
authors created a dummy variable for any type of environmental innovations
which takes the value 1 if a firm introduced either resource efficiency or
externality reducing innovations. Additional control variables are introduced
for sector specific unobserved cross-sectional differences by including 21
two-digit sectoral
dummies (Rammer & Rexhauser, 2011). Finally, according to
Czarnitzki and Licht (2006) an East Germany dummy should be is included since
«this part of the country is characterised by specific economic and
institutional structures resulting from the transformation process, including a
high level public support».
Variables definition
|
INDEPENDENT
VARIABLE
|
DISCRIPTION
|
|
Ost
|
Firms from the `new' German Länder (former East Germany),
(0=Western Germany, 1=Eastern Germany).
|
|
Iages
|
Development of innovation expenditure in the current year
1=increase, 2=steady, 3=decrease, 4=not yet known, 5=not possible to say
|
|
Qual
|
Quality improvement by process innovations: yes=1/no=0
|
|
Wett5
|
Products of competitors can easily be substituted by products of
the firm
|
|
Rek
|
Average costs reduced thanks to process innovations; 0=no,
1=yes
|
|
Ziel9
|
To reduce materials and energy consumption: 0=no importance,
1=little to 3=great importance
|
|
Ziel4
|
To gain access to new markets: 0=no importance, 1=little to
3=great importance
|
|
Mneu
|
Proportion of total turnover from new or clearly improved
products
|
|
Iapgtz
|
Expenditure on product and process design as well as other
preproduction costs linked to innovation projects: 0=no, 1=yes
|
Table2: Adapted from The Mannheim Innovation Panel: Manufacturing
and Mining & Services (2008)
| 
