Pro-Social versus Anti-Social Innovation: The Role of Corporate Strategy, Governance and Resources

Abstract

While innovation is generally thought to provide value to society, the organization literature is beginning to examine this issue more closely by noting that innovation may also lead to negative social outcomes - oftentimes unintended consequences of policies or market incentives to innovate. In this research, we investigate the firm-specific characteristics under which innovations are likely to result in socially desirable versus undesirable outcomes. Our empirical setting is the regulation of auto emissions in the EU. Using a unique 14-year on-road emission dataset and multiple sources to characterize individual automakers, we build a two-stage Heckman model to investigate how firms’ strategy, governance and resources impact the social value of their innovations. Our findings suggest that firms with superior internal governance, abundant resources, and those following a differentiation-oriented strategy are more likely to engage in pro-social innovations, while firms with weaker internal governance, limited resources, and those undertaking a cost-leadership strategy are more likely to engage in anti-social innovations. Our findings have both managerial and regulatory policy implications.