The Impact of Environmental Regulation on Technological Innovation and Competitive Advantage : A Case Study of Sulphur-free Gasoline

Abstract

In this paper, I present the impact of environmental regulation on technological innovation and competitive advantage. Previous research has verified that several aspects of environmental regulation, such as economic incentive, anticipation, stringency and certainty drive new technologies. However, such research merely pays attention to the technological innovation within each firm. How does some technological innovation diffuse within the industry and how does the firm get competitive advantage confronted with the environmental regulation? To answer this question, I use the case study strategy. The case describes the process of developing sulphur-free gasoline that reduces the CO2 emission volume developed by a major Japanese oil company. Through the case analysis, I show that technological innovation before regulation have a possibility to provide the firm high quality finished technological innovation and also provide the firm a chance of creating competitive advantage.