Taking risks in the face of uncertainty: An exploratory analysis of green innovation

- There is positive link between PEU and firms' innovation.
- Green innovating is positively related to both PEU and market-related innovation risk.
- Even if there is significant market-based innovation risks there is green innovation.
- The primary determinants of innovation risk are external and market-related.

The relationship between uncertainty and firms' risk-taking behaviour has been a focus of investigation since early discussion of the nature of enterprise activity. Here, we focus on how firms' perceptions of environmental uncertainty and their perceptions of the risks involved impact on their willingness to undertake green innovation. Analysis is based on a cross-sectional survey of UK food companies undertaken in 2008. The results reinforce the relationship between perceived environmental uncertainty and perceived innovation risk and emphasise the importance of macro-uncertainty in shaping firms' willingness to undertake green innovation. The perceived (market-related) riskiness of innovation also positively influences the probability of innovating, suggesting either a proactive approach to stimulating market disruption or an opportunistic approach to innovation leadership.