Innovation in times of crisis: a systematic literature review

2) maintain innovation activities and their innovation expenditures by adopting the firm's status quo to achieve both more stable and predictable operations [Archibugi, Filippetti, Frenz, 2013a; 2013b];

3) some firms increase their innovation activities and boost their innovation expenditures to capture the benefits of the awaited recovery [Archibugi, Filippetti, Frenz, 2013a; 2013b].

In a survey of economic crisis and innovation, D. Archibugi with co-authors [Archibugi, Filippetti, Frenz, 2013a] found that organizations that drive innovation during economic crises include: 1) a small group of fast-growing start-ups; 2) innovative young firms; 3) firms pursuing exploratory technology strategies. Moreover, an empirical study of the impact of the economic crisis on innovation [Archibugi, Filippetti, Frenz, 2013b] reports that incumbent firms are more likely than others to increase their innovation investments before the crisis. On the other hand, after the crisis, a few small firms and some new entrants are willing to increase their innovation investments.

Constraints and determinants of innovation in crisis. The three behaviours in terms of innovation investment in times of crisis can be contingent on several factors that drive or hamper innovation. Finally, it is expected to find an array of different innovation constraints and determinants of innovation during a recession that this study is trying to identify by reviewing the main conclusions of the included articles.

Firm specific characteristics: size and stage of development. Does size matter in innovation? In 2012, C. Antonelli with co-authors stated that the level of innovation increases with size in stable periods [Antonelli, Crespi, Scellato, 2012]. When it comes to innovation in times of crisis, size does not matter. The paper [Archibugi, Filippetti, Frenz, 2013a] documented that before the crisis, incumbent firms were more apt to increase their innovation investments. However, after the crisis, some small firms and newly entered firms are willing to increase their innovation spending and encourage start-ups to engage in more radical innovations [Archibugi, Filippetti, Frenz, 2013b]. D. Antonioli and S. Montresor [Antonioli, Montresor, 2021] argued that in times of crisis, SMEs following the persistence of innovation and large firms persist to a different extent.

Innovation is an essential component at all stages of development. New and small firms emerge in a competitive market through innovation. In times of crisis, the survival of new firms depends on the introduction of innovative products early in their life cycle [Cefis, Marsili, 2019]. New firms in new sectors provide innovation generation that plays a more critical role than incumbent firms [Archibugi, Filippetti, Frenz, 2013a]. M. Amore [Amore, 2015] identified different profiles of firms that may be more resilient to economic downturns, namely: 1) established firms leveraging accumulated technological knowledge; 2) young innovative firms able to take advantage of technological discontinuities.

Different types of innovation are able to play different roles in different stages of development. In the expansion period, in the early stages, incremental innovation is able to improve the efficiency of firms and public services. On the other hand, in the later stages of development, high-tech innovation, based on R&D, is more important. As A. Madrid - Guijarro with co-authors [Madrid-Guijarro, Garcia-Perez-de-Lema, Van Auken, 2013] have shown, during periods of economic weakness, investment in innovation by firms can make them stronger competitors as economies strengthen. Moreover, note that the probability of survival is only positively affected by R&D investments when firms are innovative and able to generate intellectual property [Jung, Hwang, Kim, 2018].

Strategies: innovation persistence and open innovation. Firms that use returns from previous innovations to overcome problems in financing new innovative projects place themselves in a position of innovation persistence [Antonioli, Montresor, 2021]. The experience with innovations accumulated over past recessions encourages firms to innovate more when a new recession occurs, improves a firm's ability to invest in high quality R&D projects, and produces much better patenting results because they are less financially constrained and benefit from larger innovation pools [Amore, 2015]. Because of their vast accumulated knowledge, these firms have the ability to move very quickly into new areas and industries whenever new technological opportunities are identified [Laperche, Lefe - bvre, Langlet, 2011]. Furthermore, it has been argued that to maintain the high level of innovation in the future, it is essential to invest heavily in innovation projects in the present [Paunov, 2012]. In response to the crisis, innovators need to emphasize cumulativeness and persistence of innovation, while non-innovators respond by innovating [Archibugi, Filippetti, Frenz, 2013b; Amore, 2015; Antonioli, Montresor, 2021].

Open innovation has become an essential topic of innovation management research since its definition by H. Chesbrough in 2003 [Chesbrough, 2003]. Open innovation is a strategy that can be achieved through collaboration in innovation activities by seeking external knowledge and increasing the sources and variety of knowledge needed to develop innovation paths during a crisis [Ahn, Mortara, Minshall, 2018; D'Agostino, Moreno, 2018]. Furthermore, combining existing internal knowledge with new external knowledge can lead to the successful construction of new products, services or processes [D'Agostino, Moreno, 2018]. In [Zouaghi, Sanchez, Martinez, 2018; Manez et al., 2014] it is confirmed that to make innovation a dominant model, it is necessary to find international alliances and alliances with other companies. It has been argued that new and relatively small firms adopting open innovation can overcome potential constraints in resources and financing [Archibugi, Filippetti, Frenz, 2013b].

Research and development investment. Firms invest considerable amounts of money in R&D activities to the extent that they are considered a key determinant of development and sustainability [Dimitropoulos, 2020]. However, investment in R&D is usually risky, and the results of this strategy are very uncertain and distant in time [Manez et al., 2014] that is why companies are forced to reduce their investment in R&D in case of crisis [Schumpeter, 1939; Freeman, Clark, Soete, 1982]. This type of response can have disastrous consequences for the long-term growth [Anon-Higon et al., 2015]. Along the same lines, M. Amore argued that investment in high-quality R&D projects in future recessions is the result of innovation experiences during a recession [Amore, 2015], and in [Archibugi, Filippetti, Frenz, 2013a] it is pointed out that during a recession, the availability of an R&D department and its economic performance are of major interest. Furthermore, H. Jung with co-authors [Jung, Hwang, Kim, 2018] emphasize the value of this R&D investment strategy in times of crisis, especially for innovative firms capable of generating intellectual property. Public support is now essential for R&D activities in times of recession [Hud, Hussinger, 2015].

Internal and external financial constraints. Investment in innovation activities relies essentially on the use of financial resources [Mazzucato, 2013]. There is a consensus among scholars that innovative firms have a greater demand for external capital to cover the cost of innovation activities. In addition, these activities are highly uncertain, and this higher risk adds to the firms' need for cash; therefore, they face financial constraints as a serious problem that hinders their investment in innovation [Mazzucato, 2013; Manez et al., 2014; Kapetaniou, Samdanis, Lee, 2018]. N. Lee with co-authors argued that innovative SMEs require more financing than other firms, but their access to financing is hampered [Lee, Sameen, Cowling, 2015].

The external financing of firms is mainly through bank loans, which constitute the major part of the financial debt of firms [Schiantarelli, Sembenelli, 2000]. Firms' financial constraints are primarily caused by the cost of borrowing and access to external financing is limited by capital market imperfections arising from agency conflicts, moral hazard, and adverse selection [Cowling, Liu, Ledger, 2012]. In [Cowling, Liu, Ledger, 2012] authors showed that lending to small businesses has declined significantly in times of crisis due to absolute credit rationing. In times of crisis, due to more difficult access to bank credit, firms have become more sensitive to internal financing, regardless of the cost of new debt [Manez et al., 2014]. The availability of firms' own cash reserves and robust management of their financial liquidity plays a key role in circumstances where access to external financing is difficult; they use them for financing the development of innovations and their conversion into a dominant design [Brem, Nylund, Viardot, 2020].

To overcome financial barriers to innovation, firms need to build a close and strong relationship with the lending bank [Brancati, 2015], use cash and fixed assets to protect R&D [Brown, Petersen, 2015], and pursuit of public subsidies, ensuring the stability of innovation investments during recessions [Paunov, 2012]. Furthermore, a detailed examination of the financial crisis impact on capital investments in innovative firms by M. Gie - bel and K. Kraft [Giebel, Kraft, 2019] showed that in order to maintain loan financing and to support the supply of credit to firms that face difficulties in accessing external financing, it is necessary to strengthen banks' capital buffers. In addition to this, specific tax and accounting rules could be useful. Another way to overcome financial constraints was proposed in [Lee, Sameen, Cowling, 2015]. The authors suggest diversifying the types of loans in the banking system or relying on new forms of financing such as crowdfunding.

In sum, liquidity management, financial flexibility, and public financing of firms can support all types of investments, especially investments in innovation, by allowing firms to engage in new value-added projects and by preventing key ongoing projects from being cut in times of financial distress [Brown, Petersen, 2015].

Internal and external knowledge resources. Considerable human and financial resources are required to innovate [Malerba, Orsenigo, 2000]. Firms are more likely to do it when they have abundant resources to invest in new opportunities [Burgelman, Valikangas, 2005]. Qualified human resources play a key role in times of stability as well as crisis, shaping innovation within low-tech manufacturing industries [Hansen, Ght - tel, Swart, 2014], allowing for increased production and reduced costs [Bathelt, Munro, Spigel, 2013], and neutralizing the impact of the economic downturn in terms of investment in innovation [Filippetti, Archibugi, 2011].

Firms rely on knowledge generated by internal R&D efforts for innovation [Archibugi, Filippetti, Frenz, 2013b; Ahn, Mortara, Minshall, 2018], training programs [Knudsen, Lien, 2015]; however, internal learning alone cannot generate innovation in the face of an adverse environment and firms are also driven to supplement internal knowledge through knowledge from beyond the firm, innovation collaboration with firms, educational and other research institutions and, collaborations with foreign partners [Archibugi, Filippetti, Frenz, 2013b; Ahn, Mortara, Minshall, 2018], thus enabling firms to better manage resource limitations as well as reduce risks associated with innovation, especially during the financial crisis [Zouaghi, Sanchez, Martinez, 2018].

Several studies have found that sustaining strong knowledge capabilities both internally and externally renders firms capable of powerful resilience sufficient to achieve long-term sustainable growth and mitigate the consequences of the financial crisis [Ahn, Mortara, Minshall, 2018; Zouaghi, Sanchez, Martinez, 2018].

National system of innovation. A large body of research has shown the substantial contribution of institutions to firm behaviour [Hall, Soskice, 2003]. Indeed, national institutions are responsible for both shaping of the structural context of countries and their adaptability to change [Filippetti, Archibugi, 2011]. The national system of innovation is defined as the network of institutions engaged in the development, importation, adaptation, and dissemination of innovative technologies in the public and private sectors [Freeman et al., 1987]. In [Filippetti, Archibugi, 2011] countries with stronger national innovation systems are shown to be less affected and better equipped in responding to crises. A case study of pharmaceuticals revealed that in the face of a crisis in economic and technological dimensions, an evolution of Japan's national innovation system took place from a closed, firm-based national system to a more open, network-based global structure [Umemura, 2014].

Market reforms. Korea implemented a range of market reforms following the 1997 Asian financial crisis, aiming to end state support for economic activities while emphasizing market-oriented ones [Gang, Choi, 2019]. The 1997 Korean reforms advance resource availability through measures such as opening the market to foreign investors, reducing imports and foreign ownership barriers, and removing limitations on labour movement [OECD, 1999].

By drawing on the concept of market reforms, the authors were able to show that Korean reforms have both driven and produced innovation, increased R&D investment, led to the development of new markets, and the creation of new opportunities, thus leading to greater competition, which in turn leads firms to increase their investment in innovation with the goal of developing firm-specific advantages in both technology exploration and exploitation [Gang, Choi, 2019].

Benefits of innovation in highly turbulent settings. The strategies that a firm adopts and the environment in which they are employed are key factors affecting its performance [Zajac, Kraatz, Bresser, 2000]. It has been argued from reviewing the selected papers that innovation improves performance during economic downturns [Madrid-Guijarro, Garcia-Perez-de-Lema, Van Auken, 2013; Osiyevskyy, Shirokova, Ritala, 2020], increases financial performance [Jansen, Van Den Bosch, Volberda, 2006], and influences external competitiveness both directly and through improved productivity [Brancati et al., 2021].

E. Cefis and O. Marsili argued that during the early stages of their life cycle, the introduction of innovative products helps new firms survive in times of crisis, and process innovation provides a real advantage [Cefis, Marsili, 2019]. Furthermore, according to [Ahn, Mortara, Minshall, 2018], in order to have sufficiently high resilience power to achieve long-term sustainable growth, firms need to pursue innovation (both open and closed) during the crisis. This view is supported by M. Iborra with co-authors who argue that adopting ambidexterity and strategic coherence leads to resilience [Iborra, Safon, Dolz, 2020].

In [Zouaghi, Sanchez, Martinez, 2018] it is pointed out that R&D intensity has a significant and positive effect on high-tech innovative performance. In the same vein, L. D'Agostino and R. Moreno in their study revealed that during the crisis, cooperation in innovation activities is positively associated with innovation performance [D'Agostino, Moreno, 2018].

To better understand the benefits of innovation activity and learning processes, Bran - cati and colleagues analyzed firms in Italy following the recent economic crisis and found that both innovation and learning processes boost export activity [Brancati et al., 2018].

The types of innovation persisting in times of crisis. Luck has nothing to do with the success of investment in innovation, but rather it is the result of long-term strategic commitments [Mazzucato, 2013]. Previous research has argued that the essence of the external environment exerts a significant influence on the degree of effectiveness of different forms of innovation [Zahra, Bogner, 2000]. L. Berchicci with co-authors pointed out that firms tend to make investments in product innovation in an industry downturn rather than process innovation [Berchicci, Tucci, Zazzara, 2014]. Conversely, D. Antonioli and S. Montresor reported that Italian firms significantly persisting in their radical process innovations survived the crisis [Antonioli, Montresor, 2021]. E. Cefis and O. Marsili noted that firms introducing any form of innovation and especially process innovations present a higher probability of surviving crises compared to non-innovators [Cefis, Marsili, 2019]. This view is supported in [Madrid-Guijarro, Garcia-Perez-de-Lema, Van Auken, 2013]. The authors highlighted the relative importance of different types of innovation during recessions and indicated that management innovation were the least important, followed by product and process innovation. Several studies have revealed that during recessions, firms that perform exploratory innovations increase their financial performance [Jansen, Van Den Bosch, Volberda, 2006; Walrave et al., 2017], impact firm performance level and variability [Osiyevskyy, Shirokova, Ritala, 2020] and generally pursue opportunities created in labour markets more actively [Knudsen, Lien, 2015].

In a dynamic environment, the revenues of current products may drop along with the value of existing products, which risk becoming obsolete, given that firms may decide to restructure their relatively less profitable product activities by reallocating resources to develop new ones [Jansen et al., 2006]. The business' success, therefore, depends on its ability to introduce new products and reduce the impact of obsolete ones. Therefore, firms seem to have incentives to engage in product innovation. By developing new products, companies are able to prepare for the next recovery, which can bring rentgenerating product innovations to the market [Berchicci, Tucci, Zazzara, 2014]. Most empirical studies focus on the manufacturing sector. This is why the role of formal internal R&D is relevant and product development is a key issue [Armand, Mendi, 2018].

Given all that has been mentioned so far, it can be assumed that firms adopting some form of innovation are more likely to survive than non-innovative ones.

Innovation outcomes. According to [Quintane et al., 2011], innovation is not only a process but also an outcome. The number of patents and their derivatives (patent citations, active patents) are the most widely used operationalization of innovation. Some studies of this review examined innovation activities either in terms of patents [Amore, 2015] using patent data, it is possible of focusing on the magnitude and intensity of the innovation activities [Antonioli, Montresor, 2021]. Firms that are innovative and able to generate intellectual property during a recession use R&D investment as an effective strategy [Jung, Hwang, Kim, 2018]. Following [Brem, Nylund, Viardot, 2020], a dominant design emerges when a unique design evolves from an invention along a defined technical trajectory, it then becomes a marketed product that is trusted by both competitors and innovators, thus obliging an industry to adopt a standardized design for its essential components following the emergence of a dominant design. Furthermore, it acts as an indicator of innovation, however, in times of crisis, there is an increased unwillingness to embrace risky disruptive innovations that would generate new dominant designs.

Economists have known for a long time that product entry and exit are the key mechanisms by which product innovation leads to economic growth [Klepper, 1996]. Several studies have revealed that the adoption of new products necessitates the elimination of old ones, and the speed with which this occurs is highly dependent on the company's innovation activities [Jansen, Van Den Bosch, Volberda, 2006], new innovative products with better average quality that are launched have a significant impact on the firm's factor productivity [Cooper, 2021]. When a firm's reallocation rate is high, it launches higher-quality products and achieves greater productivity increases [Argente, Lee, Moreira, 2018]. Moreover, the decline in overall productivity of about 15% can be explained by the decline in reallocation during the recession and firms with larger R&D investments experience higher levels of reallocation [Argente, Lee, Moreira, 2018]. R. Cooper points out that the pandemic has led to accelerated development of new products through the reallocation of resources and the allocation of new product projects [Cooper, 2021]. Similarly, M. Colombo with co-authors asserts that the growth performance of high-tech entrepreneurial ventures was boosted by investments in the development of new products induced by the shock of the crisis, thus protecting them from the unfavourable economic situation [Colombo et al., 2016].

Moderators of the innovation-performance link in times of crisis. The relationship between innovation capacity and performance is largely influenced by the external environment [Zahra, Bogner, 2000]. However, the effects of innovation are likely to vary considerably depending on the degree of turbulence in the environment linked to the crisis context. How do moderators shape these relationships? Studies have shown that the relationship between innovation and performance is contingent on several influential environmental aspects, such as hostility, dynamism, or intensity of competition.

Moderation of the innovation-performance link in times of crisis is presented in Table 10. Jansen and colleagues show a positive relationship between exploratory innovation and financial performance when environmental dynamism is high [Jansen, Van Den Bosch, Volberda, 2006], while Osiyevskyy and co-authors argue that the severity of the crisis functions as a positive contingency for the impact of exploration on the level and variability of firm performance [Osiyevskyy, Shirokova, Ritala, 2020]. In [Zouaghi, Sanchez, Martinez, 2018] it is pointed out that economic crisis positively moderates the relationship between R&D intensity and firm innovation performance. U. Lichtenthaler [Lichtenthaler, 2009] analyzed the data from 175 industrial firms and concluded that that technological and market turbulence moderate the effects of the individual learning processes (exploratory, transformative, and exploitative) and overall absorptive capacity on performance.

Table 10. Moderators of the innovation-performance link in times of crisis