Climate shocks and innovation persistence: evidence from extreme precipitation

Xue Lei and Shouchao He ()
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Xue Lei: Shanghai University
Shouchao He: Wenzhou University of Technology

Palgrave Communications, 2025, vol. 12, issue 1, 1-14

Abstract: Abstract Climate change has intensified extreme weather events globally, with extreme precipitation emerging as one of the most destructive meteorological phenomena causing significant economic losses and disrupting corporate operations. Understanding how these environmental shocks affect firms’ innovation persistence is crucial for maintaining competitive advantages and driving economic growth in an increasingly uncertain climate future. Using a comprehensive panel dataset combining listed companies’ financial information and meteorological data from 2012 to 2022, this study investigates how extreme precipitation affects corporate innovation persistence. Our findings reveal that extreme precipitation significantly inhibits innovation persistence, with a stronger negative effect on innovation output than input. Further mechanistic studies reveal that extreme precipitation may reshape firms’ innovation trajectories through two potential channels: exacerbating financing constraints and weakening organizational resilience. Additionally, we find that executives with R&D backgrounds and international experience exhibit superior ability to maintain innovation momentum, while geographic diversification serves as an effective risk mitigation mechanism. Our heterogeneity analysis further reveals that non-state-owned enterprises are more vulnerable to extreme precipitation’s negative impacts than their state-owned counterparts, suggesting the important buffering role of state resources and implicit guarantees. This study provides novel evidence on environmental factors’ impact on sustained innovation capabilities and offers valuable insights for investment decisions and risk management in capital markets, particularly for emerging economies facing rapid technological development and environmental challenges.

Date: 2025
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DOI: 10.1057/s41599-025-05229-5

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