Prior innovation and crisis management literature has more or less focused predominantly on how crises cause economic hardship for companies, thus framing business innovation within a pro-cyclical or counter-cyclical model. However, crises, such as natural disasters, may cause physical damage without necessarily leading to immediate economic downturns. We offer a new perspective, the behavior theory of firm (BTOF) perspective, to contribute to this gap. We argue natural disasters, as defined by crisis, inevitably cause operational instability, making firms unable to meet their stable operation aspiration, thus initiating problemistic search to address the issue. Local searches are clearly insufficient for large-scale disruption, prompting firms to distant searches for solutions, thus motivating innovation. However, BTOF only emphasizes motivation but not the ability to do so. Drawing on the resource-based view, we address this gap by theorizing that a firm’s knowledge assets, in combination with its access to particular external knowledge flows, determine the ability to innovate. We employ propensity score matching in a quasi-natural experiment formed by the 2008 Sichuan earthquake to test the theory, and further test it in the worst earthquake of the 21st century; the 2004 Indian Ocean earthquake and tsunami to assess generalizability. This paper introduces BTOF into crisis management research, sets operational stability as a new trigger for problemistic search, contributes a crucial dimension to BTOF by incorporating ability as separate from motivation, and challenges the synergy of knowledge assets with knowledge flow, emphasizing strategic management to enhance firm resilience and innovation during crises.
