Impact of Environmental Uncertainties and Strategic Flexibility in Innovation Activities on NEV Battery Recycling Firms in China

Abstract

Due to the popularization and development of new energy vehicles (NEVs) worldwide, power batteries that have been used are being retired and replaced. In China’s battery recycling industry, the legal NEV battery recycling enterprises are at a negative financial performance. Based on theory of organizational adaptation, the key to innovation performance and sustainable development is recognition of the environment and strengthening organizational flexibility. This study empirically explores the bidirectional dynamic relationships among heterogeneous environmental uncertainties, innovation activities, firm growth and strategic flexibility in Chinese NEV battery recycling firms. A total of 1040 sample data were collected from 2015 to 2021. The research results demonstrate that environmental uncertainty (EU), strategic flexibility (SF) and innovation activities (INNO) all had impacts on firm growth (FG). Specifically, INNO had strongly negative effects in the short term, and in the long term, it will bring a positive effect to FG; the impact of EPU was more important than market uncertainty (MU) to FG and innovation activities. This could be due to the dependence of the Chinese NEV battery recycling industry on government policy. However, MU has a strong impact on SF. Moreover, the levels of SF should be reasonable, otherwise it could be a burden to enterprises. There also exists the bidirectional dynamic relationships between FG and INNO. This study contributes a non-core perspective to strategic flexibility research by revealing the complex environmental mechanism, and to the Chinese NEV battery recycling industry we provide a theoretical basis and practical guidance for government and firms on how to apply SF to promote innovation and realize growth in the present business environment.