The Role of Technology Spillovers in the Process of Water Pollution Abatement for Large International Firms

The objective of this paper is to analyze the effects of technology externalities stemming from different technological sectors for international firms engaged both in water pollution abatement and in dirty activities. We present a theoretical framework and an empirical analysis based upon a dataset composed of worldwide R&D-intensive firms. In order to identify the technological proximity between the firms, we construct an original Mahalanobis environmental industry weight matrix, based on the construction of technological vectors for each firm, with European ecological patents distributed across more technology classes. Opportune econometric techniques that deal with the firms’ unobserved heterogeneity and the weak exogeneity of the explanatory variables are implemented. The findings show significant spillover effects on the productivity and environmental performance of the firms.