Can hurricanes drive green innovations?

Abstract

We propose that natural disasters (specifically hurricanes) encourage the development of green innovations in small island developing states (SIDS). Using a novel and unique dataset of hurricane instances and green innovation activities in SIDS, we find that hurricanes follow a U-shaped relationship with green innovations. This suggests that while initially hurricanes negatively impact green innovations, as firms experience more hurricanes, this will trigger the development of green innovations. Our results also reveal that present and future government regulations act as antecedents to green innovation, however government incentives (i.e., grants, subsidies, and financial incentives) are not found to impact on firms' willingness to develop green innovations. Furthermore, customer/market demand and industry codes of environmental good practice (societal influences) are found to trigger green innovation activities in SIDS firms. Finally, we find that hurricanes have no significant effect on other ‘traditional’ types of innovation. Our study deepens understanding of the underexplored nexus between natural disaster events and green innovations and has implication for optimizing policy design (‘command and control’ regulations vs ‘market-based’ incentives) for green innovations.