The effects of environmental performance on competitiveness and innovation: a stochastic frontier approach for Colombia

The main sources of input for an economy are environmental and natural resources, especially in biodiverse countries. Given this, such resources are associated with competitiveness and efficiency in that natural resources are a factor for production that affects productivity and growth. Moreover, changes resulting from natural resources becoming scarcer must be anticipated to prevent a decrease in competitiveness. Within this context, analysing competitiveness and its relationship to environmental performance is critical, especially for emerging economies with high levels of biodiversity, as a means to promote environmental care, prevent environmental damage and to improve competitiveness. This study evaluates the effects of environmental performance on competitiveness by applying a stochastic frontier approach, the World Economic Forum’s global competitiveness index and various environmental variables, and in turn, it elucidates how environmental performance affects competitiveness in Colombian regions, which are characterized by economic and social disparities. The results of this study highlight the importance of environmental performance on increasing competitiveness. Improved environmental performance should lead to an increase in competitiveness. It is important to mitigate regional disparities through the use of political instruments that promote adequate environmental measures and that consider competitiveness and innovation to promote sustainable development and the responsible use of natural resources. The findings of this study will be critical to the design of adequate instruments that consider environmental performance and competitiveness as key elements in promoting sustainability, growth and welfare in Colombian regions.