Prevention Is Better Than Cure? Climate Mitigation and Adaptation Patents and Firm Performance

ABSTRACT Drawing on recombinant uncertainty theory and using panel data regression analysis with firm, state, and industry fixed effects, we examine how stock markets react to firms' climate‐related patent approvals. We find a positive stock market response to mitigation patents but no reaction to adaptation patents. The patent technological breadth and patents in Rapidly Evolving Technology (RETech) enhance the positive association with mitigation patents but diminish it for adaptation patents. These findings contribute to our understanding of how technological scope and innovation pace shape market perceptions of climate innovations. The findings have important implications for firms' invention strategies and provide valuable insights for policymakers seeking to incentivize effective climate‐related technological developments.