Facilitating adoption of responsible innovation in business through certification

Abstract

ABSTRACTIn this paper, we use an economic approach to demonstrate why ‘rational’ businesses are not likely to implement responsible innovation (RI) unless it is economically profitable. The lack of sufficient insights into economic impacts of RI is often induced by information asymmetry. Such asymmetry would hinder consumers who would otherwise be willing to pay higher prices for products or services that are assumed to be associated with RI from actually paying a higher price. We consider the introduction of a certification scheme of RI that would act as a signaling proxy to reduce information asymmetry thereby help increase economic benefits of RI implementation that can further lead to firm profitability. Furthermore, we argue that certification can help facilitate the more effective spread of RI in the business sector by broadening the focus to include not only the ethical engagement of researchers/innovators but also the profit motives of the company.

Keywords

• Certification
• economic profit maximization
• externalities
• information asymmetry
• responsible innovation (RI)
• signaling theory