Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/316268.2 
Year of Publication: 
2025
Series/Report no.: 
DIW Discussion Papers No. 2115
Version Description: 
Updated version, September 2025
Publisher: 
Deutsches Institut für Wirtschaftsforschung (DIW), Berlin
Abstract: 
How do firms respond to greener household preferences? We construct a novel index of environmental willingness to act on the state-quarter level based on Google Trends search data. Relating the index to firm-level information on the U.S. automotive sector from 2006 to 2019, we find ambiguous results. On average, firms redirect innovation from conventional combustion technologies toward technologies that mitigate their emissions. Conversely, an initial rise in innovation on electric vehicle technologies is short-lived. We show that firm responses are shaped by the composition of their knowledge stocks as predicted by the theory on path dependence. However, we also uncover that firms—particularly those specialized in electric technologies—pursue strategies consistent with deterring competition: (anti-environmental) lobbying and strategic patenting. On aggregate, a 1% increase in the growth rate of the index has effects similar to a 50% increase in fuel price growth.
Subjects: 
Green Household Preferences
Directed Technical Change
Lobbying
JEL: 
D9
D70
O3
P28
Q55
Document Type: 
Working Paper

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2 10419/316268.2 Updated version, September 2025
1 10419/316268 First version, April 2025

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