Sustainability-driven market impacts of climate change and firms’ renewable energy innovation: A conceptual analysis

Document Type

Journal Article

Publication Title

Corporate Governance

Publisher

Emerald

School

School of Business and Law

RAS ID

69830

Comments

Rastegar, H., Eweje, G., & Sajjad, A. (2024). Sustainability-driven market impacts of climate change and firms’ renewable energy innovation: A conceptual analysis. Corporate Governance. Advance online publication. https://doi.org/10.1108/CG-07-2023-0298

Abstract

Purpose: This paper aims to unravel the relationship between market-driven impacts of climate change and firms’ deployment of renewable energy (RE) innovation. The purpose is to understand how market-related forces, influenced by uncertainty, shape firms’ behaviour in response to climate change challenges. Design/methodology/approach: Drawing on the behavioural theory of the firm (BTOF), the paper develops a conceptual model to decode the relationship between each category of market-driven impacts and the resulting RE innovation within firms. The model takes into account the role of uncertainty and differentiates between multinational enterprises (MNEs) and domestic firms. Findings: The analysis reveals five key sources of market-driven impacts: investor sentiment, media coverage, competitors’ adoption of ISO 14001, customer satisfaction and shareholder activism. These forces influence the adoption of RE innovation differently across firms, depending on the level of uncertainty and the discrepancy between environmental performance and aspiration level. Originality/value: This paper contributes to the literature in four ways. Firstly, it emphasises the importance of uncertainty associated with market-driven impacts, which stimulates different responses from firms. Secondly, it fills a research gap by focusing on the proactivity of firms in adopting RE innovation, rather than just operational strategies to curb emissions. Thirdly, the paper extends the BTOF by incorporating the concept of uncertainty in explaining firm behaviour. Finally, it provides insights into the green strategies of MNEs in the face of climate change, offering a comprehensive model that differentiates MNEs from domestic firms.

DOI

10.1108/CG-07-2023-0298

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