Benefits of Building Organizational Resilience: The Case of Climate Change

Abstract

This paper investigates the time-dependent effects of building organizational resilience. So far, empirical research only finds evidence that organizational resilience provides benefits in the long term. For the short and medium term, the link remains unclear. On the one hand, literature indicates that building organizational resilience is costly. On the other hand, actions to build organizational resilience are perceived by investors, which should provide immediate positive effects for companies. This study investigates these two assumptions in the climate change context. We apply multiple regression analysis to study the relationship between resilience capabilities and different measures of financial performance. For market value and financial volatility, our findings indicate that building organizational resilience provides immediate benefits. For the total stock return index, we find only benefits that materialize with a time lag. We find no evidence at all that building resilience capabilities is related to costs in terms of lower accounting-based financial performance. Overall findings indicate that building organizational resilience is advantageous as it prepares an organization to face the challenges of climate change and, at the same time, provides financial benefits.