Crisis-induced innovation and crisis-induced innovators

Abstract

The literature on the persistence of innovation focuses on whether firms reduce, increase, or maintain their innovation activity over time, and in particular through cyclical downturns and crisis periods. What this literature tends to underemphasise is that innovation is also a tool firms can actively use to manage the unforeseen circumstances that arise in times of crisis. We argue and find that this kind of crisis-induced innovation displays patterns that are both similar to, and different from, the innovation behaviours found in more stable periods. More firms turn to innovation, but with important differences in intensity and expected long-run returns. Pre-crisis experience in innovation and organisational agility are key characteristics leading to higher levels of innovation in response to a crisis, higher likelihood of increasing the resources allocated to innovation during a crisis, and higher expected post-crisis value from the innovations undertaken in response to a crisis.