Many analysts argue that environmental regulation is a barrier to innovation in business firms. A competing view holds that environmental regulation contributes to firm-level innovation. This article attempts to partially reconcile these two views. The article argues that organizational- and individual-level variables moderate the effect of environmental regulation generally on the radicalness of innovation at the firm level. It proposes that four moderating variables--the degree to which information analysis about environment issues is centralized, firm size, the intensity and integration of research and development (R&D) units within the firm, and whether regulation is perceived as an opportunity--change the sign of the relationship between environmental regulation and the radicalness of firm-level innovation. Empirically testable propositions are presented and a regulation-innovation profile is suggested. Directions for future research and implications for practicing managers are highlighted.


Original Citation: Sanchez, Carol M. "Environmental Regulation and Firm-Level Innovation: The Moderating Effects of Organizational and Individual-Level Variables." Business & Society 36, no. 2 (1997): 140-168.