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How does corporate R&D investment respond to climate policy uncertainty? Evidence from heavy emitter firms in the United States

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  • Khanh Hoang

Abstract

This study explores how climate policy uncertainty (CPU) affects research and development (R&D) investment of heavy emitter firms in the United States during 2000–2019. Our empirical evidence indicates that while CPU exerts a positive impact on R&D investment of general firms, it seems to be a completely different story for heavy emitter firms. After a battery of sensitivity tests, we find a robust negative impact of CPU on R&D investment of heavy emitters, suggesting that those firms play a “wait‐and‐see” strategy in response to changes in environmental policies until more is known to make decisions. However, such behavior is not observed in light emitters. Even among heavy emitters, we show that the impact of CPU is only pronounced in heavy emitters with more technology uncertainty. Further analyses show such an impact varies with management sentiment, managerial ability, and firm maturity. Our findings have implications for policymaking and corporate strategy of heavy emitters in response to CPU.

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  • Khanh Hoang, 2022. "How does corporate R&D investment respond to climate policy uncertainty? Evidence from heavy emitter firms in the United States," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 29(4), pages 936-949, July.
    • Handle: RePEc:wly:corsem:v:29:y:2022:i:4:p:936-949
    DOI: 10.1002/csr.2246
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    Cited by:

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    2. Wang, Kai-Hua & Kan, Jia-Min & Qiu, Lianhong & Xu, Shulin, 2023. "Climate policy uncertainty, oil price and agricultural commodity: From quantile and time perspective," Economic Analysis and Policy, Elsevier, vol. 78(C), pages 256-272.
    3. Guo, Jiaqi & Long, Shaobo & Luo, Weijie, 2022. "Nonlinear effects of climate policy uncertainty and financial speculation on the global prices of oil and gas," International Review of Financial Analysis, Elsevier, vol. 83(C).
    4. Ongsakul, Viput & Papangkorn, Suwongrat & Jiraporn, Pornsit, 2023. "Estimating the effect of climate change exposure on firm value using climate policy uncertainty: A text-based approach," Journal of Behavioral and Experimental Finance, Elsevier, vol. 40(C).
    5. Liu, Junrong & Deng, Guoying & Yan, Jingzhou & Ma, Shibo, 2023. "Unraveling the impact of climate policy uncertainty on corporate default risk: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PB).
    6. Huo, Dongxia & Bagadeem, Salim & Elsherazy, Tarek Abbas & Nasnodkar, Siddhesh Prabhu & Kalra, Akash, 2023. "Renewable energy consumption and the rising effect of climate policy uncertainty: Fresh policy analysis from China," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 1459-1474.
    7. Shang, Yunfeng & Han, Ding & Gozgor, Giray & Mahalik, Mantu Kumar & Sahoo, Bimal Kishore, 2022. "The impact of climate policy uncertainty on renewable and non-renewable energy demand in the United States," Renewable Energy, Elsevier, vol. 197(C), pages 654-667.
    8. Bai, Dongbei & Du, Lizhao & Xu, Yang & Abbas, Shujaat, 2023. "Climate policy uncertainty and corporate green innovation: Evidence from Chinese A-share listed industrial corporations," Energy Economics, Elsevier, vol. 127(PB).
    9. Su, Chi Wei & Wei, Shenkai & Wang, Yan & Tao, Ran, 2024. "How does climate policy uncertainty affect the carbon market?," Technological Forecasting and Social Change, Elsevier, vol. 200(C).

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