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The heat is on: An exploratory investigation of how climate change-related challenges affect SMEs' R&D activities

Author

Listed:
  • Gibson, Gráinne
  • Lenihan, Helena
  • Perez-Alaniz, Mauricio
  • Rammer, Christian

Abstract

Climate change can cause major challenges for Small and Medium-sized Enterprises (SMEs). Responding and adapting to such challenges is crucial, as SMEs are vital for driving economic growth and employment in most countries. Investing in R&D is a key way in which SMEs can build the capacities required for responding and adapting to climate change-related challenges. However, the extent to which such challenges affect SMEs' R&D activities remains a critical gap in existing knowledge. Using detailed firm-level data on 1,730 SMEs in Ireland, our study is the first to explore this issue. We achieve this, using information on SMEs' climate changerelated challenges, from a new module of the 2018-2020 wave of the Irish part of the Community Innovation Survey (CIS), the Innovation in Irish Enterprises Survey (IIE). By combining a matching approach with probit regression analysis, we find that climate changerelated challenges can increase the probability of SMEs investing in R&D. Such challenges can also increase the probability of SMEs engaging in continuous, as opposed to occasional R&D. Based on our findings, the above impacts are mainly driven by climate change, resulting in higher costs/input prices. Our study highlights the importance of R&D for SMEs to adapt and respond to climate change and provides critical insights for SMEs and policymakers alike.

Suggested Citation

  • Gibson, Gráinne & Lenihan, Helena & Perez-Alaniz, Mauricio & Rammer, Christian, 2025. "The heat is on: An exploratory investigation of how climate change-related challenges affect SMEs' R&D activities," ZEW Discussion Papers 25-032, ZEW - Leibniz Centre for European Economic Research.
  • Handle: RePEc:zbw:zewdip:319901
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    More about this item

    Keywords

    Climate change-related challenges; small and medium sized enterprises; research and development; climate change adaptation; climate change mitigation;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q55 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Technological Innovation
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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