How environmental regulations affect innovation in the Australian oil and gas industry: going beyond the Porter hypothesis

The impact of environmental regulation on innovation is of central interest to many industries and policy makers alike. While traditional research adopts a top-down view of regulation and attempts to measure the innovation response, the more bottom-up view of contemporary theory argues that firms produce innovations that exceed compliance levels as a competitive strategy. We approach this dichotomy by investigating innovation introduced by Australian oil and gas firms in light of environmental regulatory compliance burden and firm-level characteristics, including competitive capabilities. Analyses of survey responses, executive-level interviews and conference proceedings reveal both regulatory (top-down) and competitive advantage (bottom-up) perspectives explain innovation in this industry. Regression analyses reveal that product/service and novel innovations (all types) are related to a high compliance burden, competitive skills, research and development activity, and engagement in formal collaborations. Interview and conference data add nuance to our findings revealing collaborative compliance frameworks result in similar innovation outcomes