Does climate change exposure affect the intensive and extensive margins of corporate R&amp;D investment?

Emmanuel Nkansah; Emmanuel Nkansah

doi:10.3934/QFE.2025011

Quantitative Finance and Economics

2025, Volume 9, Issue 2: 317-354. doi: 10.3934/QFE.2025011

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Research article

Does climate change exposure affect the intensive and extensive margins of corporate R&D investment?

Emmanuel Nkansah ^,

Middle Tennessee State University, Jennings A. Jones College of Business, Murfreesboro, Tennessee, United States

Received: 18 February 2025 Revised: 17 March 2025 Accepted: 22 April 2025 Published: 29 April 2025
JEL Codes: G11, G30, D81, O3, Q54

In this paper, I investigate how climate change exposure affects extensive and intensive margins of corporate R&D investment. Using firm-level climate change exposure data, the empirical findings indicated that climate change exposure positively and significantly affects both intensive and extensive margin of corporate R&D investment. I show that carbon intensive firms significantly increase their extensive and intensive margins of corporate R&D in response to an increase in climate changes. Using difference-in-differences (DID) regression analysis, I found that firms in treated States invest significantly more in corporate intensive margins of R&D after the adoption of Renewable Portfolio Standards. The results are robust with other measures of climate change exposure and with the inclusion of industry and macroeconomic factors. Moreover, I found that firms in carbon intensive industries engage more in R&D than firms in green industries.
- climate change exposure,
- R&D,
- extensive margin,
- intensive margins,
- capital-intensive industries
Citation: Emmanuel Nkansah. Does climate change exposure affect the intensive and extensive margins of corporate R&D investment?[J]. Quantitative Finance and Economics, 2025, 9(2): 317-354. doi: 10.3934/QFE.2025011

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Abstract

In this paper, I investigate how climate change exposure affects extensive and intensive margins of corporate R&D investment. Using firm-level climate change exposure data, the empirical findings indicated that climate change exposure positively and significantly affects both intensive and extensive margin of corporate R&D investment. I show that carbon intensive firms significantly increase their extensive and intensive margins of corporate R&D in response to an increase in climate changes. Using difference-in-differences (DID) regression analysis, I found that firms in treated States invest significantly more in corporate intensive margins of R&D after the adoption of Renewable Portfolio Standards. The results are robust with other measures of climate change exposure and with the inclusion of industry and macroeconomic factors. Moreover, I found that firms in carbon intensive industries engage more in R&D than firms in green industries.

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