AbstractPollution prevention is an important part of a necessary technological shift in environmental policy, yet both US industry and government focus on cleanup technologies. In this paper, theoretical models of technological innovation and change are used together with examples of specific experiences with the development of environmental technologies to better understand the influence of federal environmental policy on the investment behavior of companies. A framework has been developed to make distinctions between incremental and radical technology innovations, and to understand the strategic elements necessary for radical innovation and how they may explain industrial practice. The role of government in encouraging or discouraging innovation through environmental policy and regulation is examined using examples from literature and an evaluation of elements of the Environmental Technology Initiative established by the Clinton Administration. Industry-government partnerships are important in achieving radical innovations that go beyond compliance.