This paper examines the Porter Hypothesis, which posits that environmental regulation can stimulate innovation and improve environmental and business performance. The authors test three variants of the hypothesis using data from approximately 4200 facilities in seven OECD countries. The "weak" version suggests that environmental regulation will stimulate certain types of environmental innovations, while the "narrow" version argues that flexible environmental policies are more effective than prescriptive regulations. The "strong" version posits that well-designed regulation can induce cost-saving innovations that more than offset compliance costs. The study finds strong support for the "weak" version, qualified support for the "narrow" version, and qualified support for the "strong" version. The analysis uses a unique database collected by the OECD, covering environmental policy stringency, policy instruments, R&D expenditures, environmental performance, and business performance. The results indicate that perceived policy stringency and flexible instruments like performance-based standards positively influence environmental innovation and performance, while direct effects on business performance are mixed. The study provides new insights into the mechanisms through which environmental regulation can lead to "win-win" outcomes.This paper examines the Porter Hypothesis, which posits that environmental regulation can stimulate innovation and improve environmental and business performance. The authors test three variants of the hypothesis using data from approximately 4200 facilities in seven OECD countries. The "weak" version suggests that environmental regulation will stimulate certain types of environmental innovations, while the "narrow" version argues that flexible environmental policies are more effective than prescriptive regulations. The "strong" version posits that well-designed regulation can induce cost-saving innovations that more than offset compliance costs. The study finds strong support for the "weak" version, qualified support for the "narrow" version, and qualified support for the "strong" version. The analysis uses a unique database collected by the OECD, covering environmental policy stringency, policy instruments, R&D expenditures, environmental performance, and business performance. The results indicate that perceived policy stringency and flexible instruments like performance-based standards positively influence environmental innovation and performance, while direct effects on business performance are mixed. The study provides new insights into the mechanisms through which environmental regulation can lead to "win-win" outcomes.