The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness? Stefan Ambec, Mark A. Cohen, Stewart Elgie, Paul Lanoie This paper examines the Porter Hypothesis, which suggests that well-designed environmental regulations can enhance innovation and competitiveness. Twenty years ago, Michael Porter challenged the traditional view that environmental regulations hinder business competitiveness by arguing that they can actually improve it through innovation. The traditional view held that environmental regulations restrict firms' options and reduce profits, as firms would already identify profitable opportunities to reduce pollution. Over the past 20 years, much has been written about the Porter Hypothesis. However, there is conflicting evidence, alternative theories, and a misunderstanding of what the hypothesis says. The paper provides an overview of the key theoretical and empirical insights on the PH, draws policy implications from these insights, and sketches out major research themes going forward. The Porter Hypothesis suggests that environmental regulations can lead to innovation, which can offset the costs of regulation. This is consistent with the growing trend towards performance-based and market-based environmental regulations. The hypothesis also suggests that environmental regulations can lead to an increase in firm competitiveness by improving the production process or enhancing product quality. The paper discusses the theoretical developments that have taken place over the past 20 years to explain why regulation might indeed improve competitiveness. It also reviews the empirical evidence to date, and examines the implications of our knowledge on the PH for designing regulatory mechanisms that promote innovation and competitiveness. The paper also discusses the role of environmental policies, industrial and patent policies, training, and organizational or governance conditions in enhancing competitiveness. It concludes with a forward research agenda, highlighting the need for further research on data and methodological issues, non-regulatory policies, longitudinal studies, and global studies.The Porter Hypothesis at 20: Can Environmental Regulation Enhance Innovation and Competitiveness? Stefan Ambec, Mark A. Cohen, Stewart Elgie, Paul Lanoie This paper examines the Porter Hypothesis, which suggests that well-designed environmental regulations can enhance innovation and competitiveness. Twenty years ago, Michael Porter challenged the traditional view that environmental regulations hinder business competitiveness by arguing that they can actually improve it through innovation. The traditional view held that environmental regulations restrict firms' options and reduce profits, as firms would already identify profitable opportunities to reduce pollution. Over the past 20 years, much has been written about the Porter Hypothesis. However, there is conflicting evidence, alternative theories, and a misunderstanding of what the hypothesis says. The paper provides an overview of the key theoretical and empirical insights on the PH, draws policy implications from these insights, and sketches out major research themes going forward. The Porter Hypothesis suggests that environmental regulations can lead to innovation, which can offset the costs of regulation. This is consistent with the growing trend towards performance-based and market-based environmental regulations. The hypothesis also suggests that environmental regulations can lead to an increase in firm competitiveness by improving the production process or enhancing product quality. The paper discusses the theoretical developments that have taken place over the past 20 years to explain why regulation might indeed improve competitiveness. It also reviews the empirical evidence to date, and examines the implications of our knowledge on the PH for designing regulatory mechanisms that promote innovation and competitiveness. The paper also discusses the role of environmental policies, industrial and patent policies, training, and organizational or governance conditions in enhancing competitiveness. It concludes with a forward research agenda, highlighting the need for further research on data and methodological issues, non-regulatory policies, longitudinal studies, and global studies.