How Social Movements Catalyze Firm Innovation

We investigate the impact social movements have on firm innovation through private politics. We argue that firms strategically respond to private politics by investing in new technologies that address movement-advocated issues material to firms’ performance. While both contentious private politics—when activists contentiously target firms—and cooperative private politics—when activists and firms collaborate—catalyze innovation, they do so in different ways. Contentious private politics increases the amount of innovation firms undertake by drawing managerial attention to movement-advocated issues material to the firm prompting search for solutions to those issues. Conversely, cooperative private politics provides firms access to new knowledge which encourages firms to search for solutions in areas more distant from their existing knowledge, in so doing, increase innovation involving distant recombination on material issues. We find support for our arguments in a matched sample of firms contentiously targeted, and with activist collaborations, on climate change issues, and firms that were not targets of private politics on those issues but had otherwise similar histories of climate-related innovation and relationships with climate movements and other environmental movements. Supplementary analyses corroborate the mechanisms that undergird our theoretical predictions: contentious private politics is associated more innovation closer to a firm’s expertise while cooperative private politics is associated with innovations that draw on more distant knowledge. We also find that when collaboration follows contention their respective impacts on innovation are reduced which may result from firms seeking collaborations for their legitimacy-granting benefits after contention rather than the learning opportunities they offer.