How eco-innovative firms were affected by and responded to the unexpected external shock of the COVID-19 pandemic

Abstract

The impact of COVID-19 on different types of firm strategies, and how those firms responded to the effects of the pandemic is a subject of great interest for researchers, policymakers and firm managers. This paper studied the effects and response of eco-innovative Norwegian firms to the immediate effects of the pandemic. Given the strategy, structural, and leadership changes required for firms engaged in successful eco-innovation, such firms are assumed to possess a higher degree of dynamic capabilities that not only can mitigate the negative effects of the pandemic, but more importantly allow them to respond innovatively to those effects. Utilizing a dataset from a survey of Norwegian firms in 2020, the results of econometric modelling based on factor analysis of firm perception, showed that firms that introduced product/service eco-innovations, or process eco-innovations during COVID-19 were significantly positively affected by the pandemic compared to other firms. In addition, these firms significantly introduced more innovations in other areas of operations as a direct consequence of the pandemic. However, the results also showed that firms that introduced product/service eco-innovations were also more negatively affected by the pandemic. These results confirmed that while the higher degree of dynamic capabilities attributed to firms engaging in eco-innovations can significantly contribute to their ability to be positively affected and respond more innovatively to an unexpected external shock, it does not make them entirely immune to the negative effects.