Abstract
Anecdotal evidence of climate change negatively impacting businesses appears routinely in the business press. However, the extant climate change literature on firm responses to climate risks focuses mainly on mitigation efforts (how firms can reduce their own impact on the climate), with much less attention given to adaptation strategies (how firms can cope with the adverse effects of climate change). To address this gap, this research examines the impact of climate change on innovation, a core business activity that is integral to firms’ survival and sustained economic growth. Using a dataset of 1,193 firms headquartered in 100 US and international cities, along with data on the climate hazards experienced by these cities, the authors find that an increase in the number of climate hazards in the headquarter city of the firm is negatively associated with its innovation output both directly and indirectly, through a reduction of financial slack and R&D expenditures. However, this negative effect is smaller for firms that spend more on R&D relative to their industry peers. The results have important implications for firms seeking to formulate strategies that protect their innovation outputs from the effects of climate change, and for policy makers considering policies that aid corporations in these efforts.
Details
Presentation Type
Paper Presentation in a Themed Session
Theme
Technical, Political, and Social Responses
KEYWORDS
Climate Change, Environmental Sustainability, Innovation, Adaptation, New Product Introductions
