Friend or Foe: How Social Movement Tactics Impact Firm Innovation

Abstract

We investigate the impact social movements have on firm-level innovation through private politics. We distinguish between contentious private politics, or contentious targeting of firms by activists, and cooperative private politics, when activists engage firms in formal collaborations. Combining insights from behavioral theory and social movement theory, we theorize that both contentious and cooperative private politics impact innovation but in different ways. Contentious private politics is a more effective catalyst for innovation quantity because it threatens material or symbolic damage, and in so doing, promotes risk-taking by decision makers. In comparison, cooperative private politics which triggers gain framing of problems leads to less innovation overall, but by providing firms access to new knowledge and triggering distant search, is more effective at driving novel innovations. We test our arguments in a matched sample of firms contentiously targeted, and with activist collaborations, on climate change issues, and firms that were not targets of private politics on those issues but had otherwise similar environmental performance and relationships with climate change and other environmental movements. We find contentiously targeted firms increase the number of patents on the issue advocated by the movement by 7% the following year, while firms that collaborate with activists have 12% greater novel patents. Our study contributes to stakeholder perspectives on innovation by theorizing how social movements catalyze firm-level innovation. To research on movements and markets, this study offers the first comparative analysis of the impacts of contentious and cooperative private politics on firm outcomes.