Hardship Breeds Creativity: Climate Threats and Corporate Innovation

50 Pages Posted: 2 Aug 2022

See all articles by Dongmin Kong

Dongmin Kong

School of Economics, Huazhong University of Science and Technology

Rui Shen

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics; Shenzhen Finance Institute

Ziqi Wu

Shanghai International Studies University

Jian Zhang

School of Business and Management, Shanghai International Studies University

Date Written: July 27, 2022

Abstract

This study examines whether and how climate threats (droughts) affect the innovation activities of firms in food industries around the world. We find that firms in countries with a less positive Palmer Drought Severity Index (PDSI), i.e., more drought-like conditions, file more patents and that such patents receive higher citations in the future. This association is stronger in countries with more human capital, better capital market development, and a national culture with a long-term orientation. Finally, we provide suggestive evidence that national innovation activities can reduce the exposure of corporate profits to climate threats. Overall, the evidence provides support for directed technical change theory.

Keywords: Climate Threats, Corporate Innovation, Directed Technical Change Theory, National Institutions, National Culture

Suggested Citation

Kong, Dongmin and Shen, Rui and Wu, Ziqi and Zhang, Jian, Hardship Breeds Creativity: Climate Threats and Corporate Innovation (July 27, 2022). Available at SSRN: https://ssrn.com/abstract=4173791 or http://dx.doi.org/10.2139/ssrn.4173791

Dongmin Kong

School of Economics, Huazhong University of Science and Technology ( email )

Bldg. of Econ. School, Louyu Rd. 1037#
HUST, Hongshan Dist.
Wuhan, Hubei 430074
China

Rui Shen (Contact Author)

The Chinese University of Hong Kong, Shenzhen - School of Management and Economics ( email )

2001 Longxiang Road, Longgang District
Shenzhen, 518172
China

Shenzhen Finance Institute ( email )

Ziqi Wu

Shanghai International Studies University ( email )

1550 Weniang Road
Songjiang District
Shanghai, Shanghai
China

Jian Zhang

School of Business and Management, Shanghai International Studies University ( email )

550 Dalian Road (West)
Shanghai, Shanghai 200083
China

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