ABSTRACT
This chapter offers three important propositions related to theoretical models of pro-environmental activity and innovation performance of companies, linking R&D expenditure, innovation performance and the pro-environmental activity of business. It suggests that one of the most important issues in the recent innovation literature is the impact of eco-innovation on R&D, new product development, processes and services. The chapter examines this issue more closely and explain the incentives of a revenue-maximising firm to undertake costly environmental action as well as explore the returns from this action for firms of different sizes. It addresses a lack of empirical research by using large-scale databases on returns on environmental innovation and R&D expenditure. The chapter develops a new concept of conventional and environmental new product development paradigms, starting from Kemp and Foxon and Lee and Bae, estimating the returns from eco-innovation for UK firms and quantifying the incentives that eco-innovation effectiveness provides for R&D expenditure.
