Abstract
In times of accelerating environmental crises, firms hold substantial resources that could be used for sustainable transitions through green breakthrough innovation. While scholars agree that resource abundance, such as high unabsorbed slack, fosters risk-taking in managers and thereby leads to increases in R&D investment and resulting innovation output of firms, it is unclear under which conditions such resources are funneled into socially relevant innovation, such as green breakthrough innovations. Drawing on the behavioral theory of the firm and the concept of slack search in particular, we suggest that unabsorbed slack increases a firm’s propensity to engage in high-risk green breakthrough innovation. However, we argue this association will be stronger for firms with a more liberal-leaning compared to a conservative-leaning board. Testing our hypotheses on a sample of S&P500 firms between 2002 and 2014, we find empirical support. Our study reveals an important antecedent of green breakthrough innovation and highlights the role of managerial cognition in directing slack search toward socially beneficial innovation.