Technological regimes and R&D response to COVID-19

This study examines the attributes and technological environments of firms that altered their original R&D investment plans in response to COVID-19. Building upon the Schumpeterian and evolutionary perspectives of innovation, we argue that firm-level characteristics and technological regimes jointly determine the R&D response of firms to COVID-19. Our theoretical and empirical evidence shows that technological regimes systematically affect firms’ incentives to innovate during a crisis, resulting in disparate R&D responses even among firms with comparable attributes. In a technologically dynamic regime (i.e., Schumpeter Mark I), firm size and pre-crisis innovation performance decrease (increase) the likelihood of a positive (negative) R&D response to COVID-19, whereas these relationships are reversed in a technologically stable regime (i.e., Schumpeter Mark II). These findings demonstrate that Schumpeterian innovation patterns of creative destruction and creative accumulation coexist across different technological regimes during times of crisis, largely supporting our argument.