Design and environmental technologies: Does ‘green-matching’ actually help?

Highlights

• Intellectual property rights (IPR) of worldwide top R&D investors are analysed to establish whether a green-matching between patents and design exists;

• An original textual identification of “green” IPR regarding designs and trademarks is proposed;

• Green design increases top R&D investors’ patent applications in environmental domains;

• Robust evidence in support of a green-matching is found, even when controlling for endogeneity bias;

• Firms’ internal innovative capabilities matters in making such green-matching effective.

Abstract

This paper investigates whether a green kind of design helps firms increase their capabilities for inventing in the environmental domain and whether it does so more than ‘standard’ design. It also investigates whether the effect of ‘green-matching’ between new design and technologies is conditional on firms’ innovative capabilities, as reflected by their R&D expenditure. We address these research questions with respect to the world's top R&D investors, looking at their intellectual property rights at the United States Patent and Trademark Office (USPTO) and proposing an original textual identification of green designs and trademarks. We find that green design increases environmental inventions by top R&D investors, and to a greater extent than non-environmental ones. Standard design also stimulates environmental inventions, but to a lesser extent than green design. The ‘green-matching’ actually helps, but internal innovative capabilities are required to make it effective: a green-tech ‘prize’ emerges from green design, but only once a minimum threshold of R&D expenditure has been reached.

Introduction

Designing new products and production processes by considering their impact on the environment — a practice frequently called ‘eco-design’ — has become a cornerstone of the new policy course towards environmental sustainability and the circular economy (European Environmental Bureau, 2015, European Commission, 2015). Shaping the functionality of product architectures and modules, and intervening in their aesthetic and symbolic meaning through design have been identified as crucial leverage through which firms can render their products more easily repairable and longer-lasting, make their materials and components easier to re-use, refurbish, and recycle, and reduce the use of hazardous substances (see Tukker et al., 2001).

Existing research has mainly concentrated on the managerial aspects of eco-design and, above all, on production and engineering techniques through which design can be successfully integrated into new product development (e.g. Johansson, 2002; Knight and Jenkins, 2009; Yang and Chen, 2011; Santolaria et al., 2011). Important knowledge has been obtained from these works, mainly with the help of in-depth case-studies about individual projects and/or specific products. More systematic evidence on the topic has been added by a related stream of research on environmental and eco-innovations (EI),¹ which makes extensive use of econometric analysis to investigate their determinants at the firm level (for a review, see Ghisetti and Pontoni, 2015). In these studies, design emerges as a possible driver of innovative outcomes with a favourable environmental impact. In particular, significant correlations have been found between a firms’ engagement in design activities, in terms of investments and placement in their business model, and their EI capacity (e.g. Marzucchi and Montresor, 2017; Ghisetti and Montresor, 2019).

This last stream of research suggests that through design activities, firms can acquire capabilities not only to develop new technologies but also to ‘direct’ them in the environmental domain. This is a potentially important suggestion that deserves more analysis in order to: i) identify the working mechanisms and nature of these green-tech-enabling design capabilities, and; ii) ascertain the actual extent to which they can favour firms’ environmental technologies. These are the two gaps the present paper aims to fill.

As far as the first gap is concerned, an important issue to address is whether firms’ design capabilities can be complementary to their capacity to introduce technological inventions of an environmental nature, confirming and refining what recent studies have shown with respect to innovation in general (e.g. Montresor and Vezzani, 2020). In the ‘regulatory-technology push/demand-pull approach’ to EI (Horbach et al., 2012), design capabilities have been mainly accounted for as capabilities to implement environmental regulations that insist on design. In turn, these regulation-related capabilities have been mainly searched for and found in the R&D and engineering activities/departments of firms, where eco-design practices are implemented in the first place. Design capabilities as such, that is, capabilities to introduce and implement novel design attributes — pertaining to product ergonomics, form, aesthetics, and styling, among other aspects — have not received attention, instead representing an unfortunate gap in the literature about EI determinants. A related research question is whether the design capabilities that enable the development of environmental technologies themselves have an environmental nature and whether the complementarity between technology and design extends to their environmental content. Eco-design studies might make it appear that this research question has already been addressed, or is even tautological, but this is not actually so. Eco-design has been shown to work, as demonstrated by a number of case studies that have ascertained that at the end of the relevant project (i.e. ex-post), eco-design practices can be successful and actually manage to achieve more environmentally sustainable products. However, this evidence is still scant and prevents us from knowing whether a superior capacity to introduce green design can generally be expected (i.e. ex-ante) to provide firms with a premium for developing new environmental technologies, thus justifying the managerial and policy support of its development.

Recent research has suggested that EI would rely on ‘distinctive sustainability‐oriented capabilities’ and has consistently found that ‘green R&D’ favours these more than general (i.e. non-green) R&D (Demirel and Kesidou, 2019). Still, in light of the technical/managerial complexity that eco-design studies have shown in their application, we do not know whether green design capabilities pay off more than standard design in spurring firms to advance environmental technologies. In brief, the plausible gain of a ‘green-matching’ between design and technology still remains an open question.

The second gap this paper aims to fill is empirical. Applied research on the relationship between (green) design and green technologies has been scanty so far, above all due to problems in collecting comparable data for large samples of firms. Dedicated surveys have recently been drafted and administered to firms for this scope (see, for example, the 2014 and 2015 releases of the European Innobarometer), and important results have been obtained by running econometric analyses on the these datasets (e.g. Ghisetti and Montresor, 2019; Montresor and Vezzani, 2020). However, two issues remain open also in this kind of analysis. On the one hand, in survey-based studies design and eco-design are generally captured by asking the interviewed firms about their investments in design and about the centrality of design in their business model (Ghisetti and Montresor, 2019). In brief, (green) design is defined following a ‘subject-based’ approach and focusing on the inputs of the relative capabilities, with all the biases these methodological choices entail (Smith, 2014). On the other hand, while evidence of a significant correlation between firms’ design investment/engagement and their capacity to introduce new sustainable technologies has emerged along this survey-based stream of research, its reliability is somehow limited. In particular, as with respect to ‘standard’ innovations (Filippetti, 2011; Montresor and Vezzani, 2020), cross-sectional survey data do not guarantee that the detected relationship is actually a causal one.

The present paper aims to fill this second research gap by proxying firms’ design capabilities with an object-based approach that uses the number of design patents at the United States Patent and Trademark Office (USPTO). Design data are drawn from the EC-JRC/OECD COR&DIP© database, covering the IP (intellectual property) bundle of the top corporate R&D investors worldwide. This is an interesting sample of firms, whose development of green technologies can be captured by looking at the patents they have filed that have a green characterisation (Hernández Guevara et al., 2019), following the Environmental Technology Classification provided by the OECD (Haščič and Migotto, 2015). In the absence of similar classifications for other IPs and in order to address the role of green design, we propose an original text-based analysis of designs, through which their environmental nature can be identified in a way that shows encouraging traces of both internal and external validity. These green design (and trademark) data are not affected by the respondent-bias of subject-based data. Furthermore, differently from previous cross-sectional (survey-based) studies, we rely on a dataset that allows us to test the relationships at stake using different regression models and to get closer to an actual causal nature for these.

The rest of the paper is structured as follows. Section 2 positions our paper in the extant literature and illustrates our research questions. Section 3 presents the dataset, our green-design measurement, some descriptive statistics, and our econometric strategy. Section 4 illustrates the main results, and Section 5 offers some concluding remarks.