Energy Diversification and Firm Performance: The Moderating Role of Innovation Capability, Culture and Industry

Articles in Press

Document Type : Research Paper

Author

Assistant Professor of Management, Faculty of Management, Economics and Accounting, Payamenoor University, Tehran, Iran

Abstract

This study examines the impact of energy diversification on firms’ financial performance at the international level and explores the moderating role of corporate innovation capability. Drawing on a comprehensive panel dataset comprising 31,000 firm-year observations from 50 firms across 31 developed and developing economies between 2002 and 2021, the analysis employs multivariate regression using a two-stage least squares instrumental variable (2SLS-IV) approach to address potential endogeneity.

The results indicate that, in isolation, energy diversification has a significantly negative effect on financial performance. However, this relationship is moderated by firms' innovation capabilities—particularly those driven by research and development investments—which, in some cases, can reverse the negative impact and lead to positive financial outcomes. The moderating effect of innovation is especially pronounced in energy-intensive industries, such as raw materials and energy, compared to less energy-intensive sectors. Moreover, this effect is more evident in countries characterized by individualistic and long-term-oriented cultural traits that encourage risk-taking and sustainability initiatives.

These findings highlight the complex interplay between energy diversification, innovation, and contextual factors such as industry characteristics and national culture. The study provides valuable insights for corporate managers aiming to enhance energy strategies through innovation, and for policymakers designing financial incentives to promote investment in clean technologies

Keywords

Main Subjects

Journal of Asset Management and Financing

Articles in Press, Accepted Manuscript
Available Online from 07 June 2025

Files

Share

How to cite

Statistics