Industry concentration and substantive environmental performance

Abstract

Using firm-level data for the period 2014-2019 from the South Korean manufacturing sector, this paper empirically estimates whether industry concentration, measured by HHI or CRk, is associated with substantive firm-level environmental performance, measured by Trucost’s environmental damage costs at total and direct levels from individual drivers of damage. In additional analysis, it also investigates the interaction effect between industry concentration and R&D intensity, a control variable within the model. The results, especially at the total cost level, show that industry concentration has a positive and significant relation with environmental damage costs. Also, industry concentration has a moderating effect on the beneficial influence of R&D intensity. Ultimately, these suggest that competition is associated with stronger environmental performance. The findings are robust to alternative variables of market concentration and alternative econometric specifications. The findings provide useful insight to policy-makers, regulators and firm-level decision-makers alike.