In this article, we extend the innovation literature by examining how firms respond to crisis, specifically exogenous crises. At their early onset, crises may represent a window of opportunity for innovation, but it is not equally allocated across firms. We created a unique database of 636 biopharmaceutical firms, from 24 countries and territories, developing innovative treatments during the early outbreak of the COVID-19 crisis to study this phenomenon. We found that firms acted strategically to the shifting external environment and attempted to capitalize on the opportunity by pursuing different but complementary innovation strategies (i.e., radical versus repurposed). The successful outcome of a chosen strategy was highly dependent upon a firm's accumulated knowledge resources, which varied in degree of diversity (i.e., homogeneous versus heterogeneous). We found that firms with more focused R&D (i.e., homogeneous knowledge) developed more radical innovations, whereas firms with more diverse R&D (i.e., heterogeneous knowledge) repurposed innovations. We controlled for firm size (small versus large), firm age (startup versus mature), and country classification (developing versus emerging). We also controlled for a firm's prior knowledge and expertise in coronavirus research and found that it did not influence innovation. Our results suggest that this unique period of environmental uncertainty and crisis created a window of opportunity and a level playing field for innovation.
Keywords: COVID-19; crisis; knowledge; radical innovation; repurposed innovation.