Innovate or acquire? An empirical analysis of global firms' strategies to mitigate carbon risk

Lin, Z., Shi, S. and Pain, K. ORCID: https://orcid.org/0000-0003-1451-9252 (2025) Innovate or acquire? An empirical analysis of global firms' strategies to mitigate carbon risk. Business Strategy and the Environment. ISSN 0964-4733 (In Press)

Abstract/Summary

Porter’s hypothesis suggests that environmental regulations motivate firms to innovate by investing in Research and Development (R&D). However, is R&D the sole strategy open to global firms seeking to mitigate their exposure to carbon risk? The study addresses this question by exploring two corporate strategies - innovating strategy via R&D and acquiring strategy via Mergers and Acquisitions (M&As). Our dataset comprises 7,903 global firms that pursued either R&D or M&A strategies between 2000 and 2020, examining the impact of emissions on global firms’ R&D and M&A decisions and their preferences for the two options. We find that elevated pressures on carbon emissions prompt firms to pursue both R&D and M&A. Firms tend to adopt R&D strategies under stringent regulations, while they opt for M&A strategies amidst financial constraints. Our findings not only clarify the strategic trade-offs between innovation and acquisition but also validate the complementary roles of institutional and stakeholder theories in shaping proactive carbon management.

Item Type	Article
URI	https://reading-pure-test.eprints-hosting.org/id/eprint/124875
Refereed	Yes
Divisions	Henley Business School > Real Estate and Planning Central Services
Download/View statistics	View download statistics for this item