Assessing the socioeconomic impact of climate vulnerability on regional innovation: role of institutional quality in top 10 innovative countries

Abstract

Rapid climate change has posed significant challenges globally, impacting various facets of socioeconomic development. Understanding the intersection of climate vulnerability (CVN), institutional quality (INQ) and innovation performance is crucial, especially within highly innovative nations. This study aims to investigate the relationship between CVN, INQ and innovation performance. The empirical analysis was conducted across the top ten innovative countries and by considering a wide range of data over the period 1995–2021. For regression analysis, the authors use fully modified ordinary least squares and dynamic ordinary least squares models. The study uncovers a negative impact of CVN on innovation performance and a positive association between INQ and innovation. Notably, INQ moderates the relationship between CVN and innovation. The study emphasizes strategic policies that fortify institutions, promote climate-resilient innovation and integrate innovative practices into climate adaptation strategies, propelling nations toward resilient and innovative development paths. The analysis highlights the need for institutional strengthening and innovation-centric climate policies. Robust institutions play a pivotal role in fostering innovation amidst climate challenges. The study’s novelty lies in its holistic analysis of CVN, INQ and innovation within top innovative countries, uncovering the moderating effect of INQ on the climate–innovation nexus.