We examine how Tobin's Q is linked to 'clean' and 'dirty' innovation and innovation efficiency at the firm level. Clean innovation relates to patented technologies in areas such as renewable energy generation and electric cars, whereas dirty innovation relates to fossil-based energy generation and combustion engines. We use a global patent data set, covering over 15,000 firms across 12 countries. We find strong and robust evidence that the stock market recognizes the value of clean innovation and innovation efficiency and accords higher valuations to those firms that engage in successful clean research and development activities. The results are substantively invariant across innovation measurement, model specifications, estimators adopted, select sub-samples of firms and United States and European patent offices.

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2 July 2020

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European Journal of Finance , pp.1-31, 2020

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DOI: 10.1080/1351847X.2020.1785520

https://www.tandfonline.com/doi/full/10.1080/1351847X.2020.1785520

This Journal article is published under the centre's Growth programme, Green Transition programme.

This publication comes under the following theme: Clean growth