Technical Report Productivity, Capital Intensity and ISO14001 Adoption―Theory and Evidence from Vietnam

Ni, Bin

15-26pp.1 - 24 , 2015-10 , Graduate School of Economics and Osaka School of International Public Policy (OSIPP) Osaka University
The determinants of ISO14001 adoption have been considered to fall into two categories: the external pressure from environment-oriented stakeholders or customers; the internal need due to expected future benefits. In this paper we take a step further to elaborate on the mechanism of firms' adoption by investigating the interrelationship among firms' productivity, capital intensity and the decision-making of the adoption. Applying a general equilibrium model, we show that under optimal condition, highly productive firms can benefit more from the adoption. In the meantime technology advancement potentially drives up the capital intensity of the firms, and this factor will positively affect firms' incentive of adoption as well. The empirical practice using the firm-level data in Vietnam verifies our predictions with robustness. In addition, we find that the phenomenon outlined above becomes even more obvious in the manufacturing sectors.

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