Policy mix or policy mess? Effects of cross-instrumental policy mix on eco-innovation in German firms

Abstract This paper evaluates the effectiveness of a policy mix between general innovation policies and environmental policies in fostering the adoption of global warming-related eco-innovations both in the short term and long term. Focusing on process eco-innovations, we investigate whether the combined impact of general innovation and environmental policy instruments, which we term a cross-instrumental policy mix, is greater than their individual impact. We examined data from the Mannheim Innovation Panel on German firms, investigating both cross-sectional data from 2015 and longitudinal data from two waves of the survey conducted in 2009 and 2015. We apply two models, based respectively on a matching analysis and a panel analysis. We find that cross-instrumental policy mix has a stronger positive effect on process eco-innovations than the impact of general innovation policy instruments alone, both in the short and long term. In contrast, although we expected the greater impact of a cross-instrumental policy mix relative to environmental policy instruments, this argument is not supported by our empirical results. Our study offers policy implications concerning the coordination of innovation and environmental policies in achieving an optimal policy mix.