Green innovation and environmental performance: the role of economic interactions and technological contaminations across industries

Exploring the economic interactions as well as the technological contaminations across industries, this paper investigates the extent to which being economically and technologically interlinked can drive the capacity of an industry within a specific country to foster green innovation and in turn, enhance its environmental performance. The theoretical framework of this study integrates the concepts of core supply-chain industries and general-purpose industries to better understand the industrial drivers influencing greater green innovation capacity. From this perspective, a core supply-chain industry functions as a crucial node within the global economic network, facilitating the flow of goods, materials, and services across sectors through input-output linkages. Conversely, a general-purpose industry serves as a catalyst for innovation, driving progress across multiple sectors by developing technologies with broad and versatile applications. The central premise is that a core supply-chain industry leverages its deep integration within supply chains to foster strategic inter-industry partnerships and access a more diverse knowledge base. Simultaneously, a general-purpose industry capitalizes on its ability to create technologies that serve as platforms or frameworks for other industries to build upon. Given the inherently complex and collaborative nature of green technologies, we hypothesize that industries capable of aligning their roles as both economic and technological hubs - within global supply chains and innovation networks, respectively - are better positioned to access diverse knowledge pools and develop the recombination capabilities necessary to drive green technological progress and higher environmental performance. To address this research issue, we used data from two primary sources. First, we use the Global Resource Input Output Assessment (GLORIA) database, a multi-region input-output dataset which illustrates how the output of one industry (goods or services) serves as an input for another, providing a comprehensive view of the interdependencies across industries within an economy and among different countries. From this database, we reconstructed input-output data for 31 European countries, plus US, China and the Rest of the World, disaggregated into 39 agri-food industries for the period 1990-2020. Finally, we compute network indexes as proxy to capture the position and influence of country-industries within global production networks. Second, we leverage the OECD RegPat database to obtain green patent data by country and sector from 1990 to 2020. This allows us to compute, on the one hand, the technological contamination across industry as a measure based on co-occurrence analysis and cosine similarity. On the other hand, it is also used to assess the extent to which an industry contributes to foster the green transition by measuring the number of applied green patents at industry-country level. Finally, environmental performance is measured using GLORIA satellite accounts and computed as the ratio between CO2 emissions and country value-added, or advancements in biodiversity preservation and sustainable resource use. By combining these dimensions, we aim to demonstrate that economic interaction and technological contaminations better support industries to develop green innovations and to achieve environmental performance. Specifically, we expect to find evidence of higher green patent production, significant reductions in CO2 emissions, increased value-added, and enhanced biodiversity preservation in country-industries that are more economically and technologically interlinked within their production and innovation networks. To conclude, this research provides novel insights into the intersection of GVC integration, technological innovation, and environmental sustainability, contributing to the understanding of sustainable industrial transformation.