Climate variability, innovation and firm performance: evidence from the European agricultural sector

Abstract

It is generally accepted that adaptation to climate variability requires a technological advancement strategy. However, the innovation process has received little explicit consideration in this framework. We employ a panel endogenous switching regression model to explore whether and to what extent climate variability affects firm performance through the ability to induce the development of adaptation innovations in key resource-based sectors in Europe during the period 2007-2017. Our findings confirm that the knowledge generation process at the heart of climate change adaptation technologies enhances firm performance, especially for firms in the aquaculture and fishing sub-sectors in northern European countries.