Innovation and Organizational Resilience: Evidence from Publicly Traded Companies in the United States

Abstract

This paper empirically examines the relationship between innovation and resilience. Based on prior conceptual-theoretical and empirical literature in the field, it is hypothesized that organizations allocating greater resources to innovation prior to an exogenous crisis, as well as those allocating greater resources to innovation during a crisis, are more resilient than their counterparts not undertaking such allocation. In addition, it is hypothesized that organizations that have been adversely affected by an exogenous crisis but allocate greater resources to innovation following its adverse impact are more resilient than their counterparts not undertaking such allocation. To test these hypotheses, the paper develops two new measures of resilience and applies those to a panel dataset of around 300 publicly traded companies in the United States. It is found that holding other factors, such as industry, liquidity, and age, constant, organizations allocating greater resources to innovation are more resilient to exogenous crises. The allocation of resources to innovation pre-crisis has a greater impact on organizational resilience than the allocation of resources to innovation during a crisis. Based on these findings, the paper offers a novel conceptualization of innovation as a resilience strategy, with respective implications for management theory and practice.