This article draws on responsible innovation (RI), hybrid organizations, institutional rigidity, and national innovation systems (NISs) to assess and contextualize the innovation performance of forprofit firms seeking to resolve grand challenges (GCs). The extant research on RI lacks the theoretical underpinnings to profile the unique characteristics of RI firms and the contextual conditions behind the resolution of GCs through RI. This study aims to fill this important gap by focusing on a specific type of RI firm-a firm seeking to reduce climate change through implementation of a circular economy model. By studying a multi-country sample of 1,153 manufacturing firms, we implemented propensity score matching (PSM) and the Heckman selection model to compare the patent productivity of RI and non-RI firms. Our evidence demonstrates that RI firms display lower likelihood of patenting and lower patent productivity than non-RI firms when they do engage in patenting. Furthermore, we found that a stronger national R&D environment can be conducive to aligning public interests and private incentives by enabling RI firms to enhance their patent productivity. Additionally, RI firms in industries with lower levels of technological complexity capture more value from improvements in R&D environments than firms with higher levels of technological complexity Our argument as a whole contributes to the GC and RI literature streams by considering both the innovation barriers faced by RI-oriented firms and the macro/industry boundary conditions that enable such organizations to overcome them.
Practitioner Points Tackling grand challenges need the involvement of hybrid organizations that combine profit orientation with responsible innovation. In the context of climate change, hybrid organizations report a lower patent productivity than strictly for-profit organizations. This seems to be consistent with anecdotal evidence from other grand challenges, i.e., space exploration, pandemics and zero hunger. Contextual conditions reduce the patent disadvantage of hybrid organizations. Hybrid organization perform better in developed nations with high levels of national R&D investment and in less technological complex industries.