Recombining Knowledge for Climate Innovation: Evidence From US Energy Incumbents

Abstract

As the climate crisis intensifies, energy incumbents must strategically transform their fossil-fueled legacies to remain competitive and sustainable. Yet, little is known about how internal knowledge architectures and external industry positions jointly shape their capacity for climate innovation. Building on the knowledge recombination literature, this study introduces knowledge coupling—the integration of diverse knowledge elements—as a structural mechanism enabling technological adaptation. We theorize an inverted U-shaped relationship between coupling and climate technology development, where moderate coupling balances coherence and flexibility. Extending this logic, we argue that firms positioned at the technological periphery—facing fewer institutional constraints—derive greater sustainability benefits from coupling by pursuing unconventional innovation paths. Using panel data on US energy incumbents from 1981 to 2022, our analysis supports these propositions. The findings reveal how internal knowledge design and external positioning jointly drive environmental innovation in the transition toward sustainable energy systems. © 2025 The Author(s). Business Strategy and the Environment published by ERP Environment and John Wiley & Sons Ltd.