Does Climate Change Affect Firms’ Innovative Capacity in Developing Countries ?

Pascale Combes Motel (pascale.motel_combes@uca.fr), Jean-Louis Combes, Bao-We-Wal Bambe (bawe.bambe@gmail.com) and Chantale Riziki Oweggi (chantale_riziki.oweggi@doctorant.uca.fr)
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Pascale Combes Motel: LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne, UCA - Université Clermont Auvergne
Bao-We-Wal Bambe: LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne, UCA - Université Clermont Auvergne
Chantale Riziki Oweggi: LEO - Laboratoire d'Économie d'Orleans [2022-...] - UO - Université d'Orléans - UT - Université de Tours - UCA - Université Clermont Auvergne, UCA - Université Clermont Auvergne
Authors registered in the RePEc Author Service: Pascale Motel Combes (pascale.motel_combes@uca.fr)

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Abstract: We investigate the impact of climate change on firms' investment in research and development (R&D) in developing countries. The paper relies on two contrasting hypotheses. In the first hypothesis, we speculate an optimistic situation where climate change could induce firms to spend on R&D to both reduce their environmental impact and curb the effects of future climate shocks. In the second hypothesis, we propose a pessimistic scenario where climate change would reduce firms' incentives to invest in R&D. This second hypothesis would mainly be due to tighter conditions for access to finance from lenders, given the increased uncertainty about the firm's future returns in the face of climate change. The empirical results support the second scenario, small firms being more severely affected. Furthermore, we examine the underlying mechanisms and identify financial access as the key channel through which climate change reduces R&D investment.

Keywords: Climate change; Firm innovation; Developing Countries (search for similar items in EconPapers)
Date: 2023-12-08
Note: View the original document on HAL open archive server: https://hal.science/hal-04341934
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Working Paper: Does Climate Change Affect Firms’ Innovative Capacity in Developing Countries? (2024)
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