This paper, titled "Determinants of Environmental Innovation – New Evidence from German Panel Data Sources," by Jens Horbach, explores the factors influencing environmental innovations using two German panel data sources: the establishment panel of the Institute for Employment Research (IAB) and the Mannheim Innovation Panel (MIP). The study aims to address the dynamic nature of the environmental innovation process, which is often overlooked in static survey-based analyses. The paper outlines the theoretical framework of environmental innovation, emphasizing the role of technological capabilities, market dynamics, and environmental policy. It highlights that environmental innovations are driven by improvements in technological capabilities through R&D and education, as well as by market forces such as demand and competition. Environmental policy, particularly environmental regulation and management tools, is also identified as a significant driver, with cost savings being a key factor. Empirical analyses using discrete choice models on the IAB and MIP data confirm that technological capabilities, demand, and environmental policy all play crucial roles in triggering environmental innovations. The "innovation breeds innovation" hypothesis is supported, indicating that firms with a history of innovation are more likely to innovate in the present. The study also finds that environmental management tools help firms detect cost savings, which are a driving force behind environmental innovation. The paper concludes by summarizing the findings and discussing the implications for policy and practice, emphasizing the importance of fostering technological capabilities and implementing effective environmental policies to promote environmental innovation.This paper, titled "Determinants of Environmental Innovation – New Evidence from German Panel Data Sources," by Jens Horbach, explores the factors influencing environmental innovations using two German panel data sources: the establishment panel of the Institute for Employment Research (IAB) and the Mannheim Innovation Panel (MIP). The study aims to address the dynamic nature of the environmental innovation process, which is often overlooked in static survey-based analyses. The paper outlines the theoretical framework of environmental innovation, emphasizing the role of technological capabilities, market dynamics, and environmental policy. It highlights that environmental innovations are driven by improvements in technological capabilities through R&D and education, as well as by market forces such as demand and competition. Environmental policy, particularly environmental regulation and management tools, is also identified as a significant driver, with cost savings being a key factor. Empirical analyses using discrete choice models on the IAB and MIP data confirm that technological capabilities, demand, and environmental policy all play crucial roles in triggering environmental innovations. The "innovation breeds innovation" hypothesis is supported, indicating that firms with a history of innovation are more likely to innovate in the present. The study also finds that environmental management tools help firms detect cost savings, which are a driving force behind environmental innovation. The paper concludes by summarizing the findings and discussing the implications for policy and practice, emphasizing the importance of fostering technological capabilities and implementing effective environmental policies to promote environmental innovation.