Implicit Cognition, Capabilities, and Incentives: Assessing Investment Response to the Renewable Energy Revolution

This study examines how cognition, capabilities and incentives shape investment responses to renewable energies as an innovation that currently fundamentally changes energy industries. I focus on implicit managerial cognition and measure it with an Implicit Association Test. In two separate studies with industrial and financial investors, I find a significant interaction effect of investor type with implicit cognition on the dependent variable energy investments. Implicit cognition has an influence on industrial investors' decision to invest in renewable versus fossil energy, whereas it has no influence among financial investors. Furthermore, the lack of organizational incentives to invest has a negative effect on renewable energy investments, whereas lack of organizational capabilities has no significant impact. The study provides unique empirical evidence on the influence of implicit cognition in investment decision-making of professional investors. It has implications not only for the energy industry, but also for a better understanding of investment decision-making processes that are at the root of the current financial crisis.