2.5 Empirical Results
2.5.1 Main Results
Table 4 presents the estimation results based on the CIS 2008. We report three combinations of institutional variables for each EI type. Column 1 and 2 involve only the variable for formal institutions (Model 1). Better formal institutions are expected to positively affect the probability that firms introduce an EI. This hypothesis is confirmed, as the marginal effect at the mean (MEM) is positive and highly significant, both for Ecomat and Ecoco. According to our estimations, the probability that a firm will introduce an EI relating to material reduction is 12.89% higher in the country with the strongest formal institutions compared to the country with the weakest formal institutions, if all other variables are taken at their mean value. This difference is a little larger for CO2 emissions, where the estimated difference amounts to 14.13%.
Table 4: Results of probit models for the CIS 2008
(1) (2) (3) (4) (5) (6)
Analysis type Univariate Probit
Univariate Probit
Univariate Probit
Univariate Probit
Univariate Probit
Univariate Probit
Dep. Var. Ecomat Ecoco Ecomat Ecoco Ecomat Ecoco
Inst. Var. Model 1 Model 1 Model 2 Model 2 Model 3 Model 3
iForm .1289*** .1413*** .0558*** .0723***
iInf .1264*** .1204***
iForm*iInf .1525*** .1636***
Size .1304*** .1279*** .1340*** .1316*** .1330*** .1299***
Group .0376*** .0190*** .0433*** .0242*** .0451*** .0273***
International .0422*** .0086** .0438*** .0100*** .0461*** .0132***
Sectors Yes Yes Yes Yes Yes Yes
Obs. 46190 46190 46190 46190 46190 46190
Notes to Table 4: Marginal effects at the means are reported. Concerning dummy variables, the values report the change in probability for a discrete change of the dummy variable from 0 to 1.
For continuous variables (Size, iForm, iInf, iForm*iInf) we report the change in probability when varying the concerned variable from the minimum to the maximum value.
*, **, *** denote significances of the marginal effects at the 10%, 5%, and 1% level, respectively.
Ind. Dummies (Sectors), at the most detailed level provided in the CIS data, are included but not reported. The constant is not reported. Robust standard errors were used.
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This picture changes when including the informal institutional variable (Model 2) as the effect of formal institutions is significantly reduced to 5.6% for materials and 7.2% for CO2, respectively. The estimated effect of informal institutions is slightly larger for materials with 12.6% compared to 12% for CO2. When generating a variable that combines formal and informal institutional quality in one variable (Model 3), the effect is again slightly stronger for CO2. For both EI categories, the effect of the combined institutional variable is larger than for the formal institutional variable only.
To understand this relatedness of the two institutional variables in more detail, Figure 1 displays the relationship of the formal and informal institutional variable. It can be seen that there is a tendency of a positive coupling between both formal and informal institutions. Still, the two dimensions also introduce a certain degree of heterogeneity as can be seen by the fact that countries with similar formal institutions, such as Lithuania and Slovakia, differ strongly with respect to their informal institutions. Similarly, while Portugal and Germany score high in both institutional dimensions, Portugal has the strongest informal institutions, and Germany has the strongest formal institutions. Ireland is the most striking counterexample, as it has strong formal institutions, but underperforming informal institutions.
The effects of our control variables confirm our expectations, as all variables positively affect the probability that a firm will introduce an EI. The largest effect is found for Size, as the difference in probability between the smallest and largest firms is estimated as ~13%. Table 5 details our estimation results for the CIS 2014 wave.
Table 5: Results of probit models for the CIS 2014
(1) (2) (3) (4) (5) (6)
Analysis type Univariate Probit
Univariate Probit
Univariate Probit
Univariate Probit
Univariate Probit
Univariate Probit
Dep. Var. Ecomat Ecoco Ecomat Ecoco Ecomat Ecoco
Inst. Var. Model 1 Model 1 Model 2 Model 2 Model 3 Model 3
iForm .1539*** .3196*** .0355*** .1858***
iInf .1745*** .2131***
iForm*iInf .1833*** .3409***
Size .1848*** .2355*** .2048*** .2599*** .1923*** .2502***
Group .0196*** .0197*** .0274*** .0294*** .0276*** .0363***
International .0260*** .0172** .0209*** .0126* .0334*** .0303***
Sectors Yes Yes Yes Yes Yes Yes
Obs. 23873 23873 23873 23873 23873 23873
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Notes to Table 5: Marginal effects at the means are reported. Concerning dummy variables the values report the change in probability for a discrete change of the dummy variable from 0 to 1.
For continous variables (Size, iForm, iInf, iForm*iInf) we report the change in probability when varying the concerned variable from the minimum to the maximum value.
*, **, *** denote significances of the marginal effects at the 10%, 5%, and 1% level, respectively.
Ind. Dummies (Sectors), at the most detailed level provided in the CIS data, are included but not reported. The constant is not reported. Robust standard errors were used.
Figure 1: Formal and informal institutions for the CIS 2008
Comparing the effects between the two samples should be treated with caution, as we cannot identify the extent to which the firms surveyed in the two waves overlap. However, given the large number of firms surveyed in each country we consider it justifiable to compare the results.
The effect of formal institutions (Model 1) is again positive and highly significant. For Ecomat, the effect is a little larger than in the CIS 2008, with an estimated effect of 15.4%. For Ecoco, there is a substantial increase in the impact of formal institutions as the effect increases to 32%, more than twice as large as the CIS 2008 sample.
When including informal institutions in our CIS 2014 model (Model 2), the observation from the CIS 2008 is confirmed, as the effect of informal institutions are estimated to be larger for
Weak formal Strong informal
Strong formal Strong informal
Strong formal Weak informal Weak formal
Weak informal
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both EI categories. For Ecomat, the effect of formal institutions is even smaller, at 3.6%, while the effect of informal institutions is a little larger, 17.5%. For Ecoco, the opposite observation holds concerning the ratio of the two institutional dimensions. Formal institutions exert a substantially larger effect in the CIS 2014 sample than in the CIS 2008 sample, estimated at 18.6%. Although the effect of informal institutions also increases from 12% to 21.3%, the measure of the effect of the two institutional dimensions on Ecoco are now almost equal. Thus, it can be generally stated that the influence exerted by institutions has changed over time.
Formal institutions are less relevant for Ecomat, whereas informal institutions appear to be more significant. On the other hand, both institutional dimensions exert a more significant impact on Ecoco. The effect of informal institutions almost doubles, and the effect of formal institutions almost triples. Hence, the opposite holds for Ecoco, as formal institutions are relatively more important for the CIS 2014. The interaction variable (Model 3) for both institutional dimensions supports this pattern, as the effect settles at 18.3% for Ecomat, and 34.1% for Ecoco.
Figure 2: Formal and informal institutions for the CIS 2014
Weak formal Weak informal
Strong formal Weak informal Weak formal
Strong informal
Strong formal Strong informal
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Figure 2 displays the relatedness of formal and informal institutions for the second CIS wave.
Again, a positive coupling of the two dimensions seems evident. Yet again, each country shows unique patterns of the formal/informal relationship. Further, while the general structure of the country positioning remains quite similar, certain changes emerge. This includes the shift between Romania and Bulgaria, with Romania now outperforming Bulgaria, or the changes of position between Lithuania and Latvia, as the informal institutions of Latvia have substantially improved, while Lithuania reverted.
The results of our additional control variables confirm our expectations. All variables are again highly significant and positive. The only exception is our variable International in the case of Ecoco. The effect of Size is more pronounced, ranging at ~20% for Ecomat and ~25% for Ecoco.33 The effect of Group is more homogenous than for the CIS 2008 as the effect is ~3%
for both EI types. International again has a larger effect for Ecomat, although the differences to the effects for Ecoco are also substantially smaller.