Status quo or giant ambitions? Norwegian Salmon farming SMEs' innovation responses to environmental regulations

Due to strict environmental regulations, the salmon farming industry needs to innovate to remain competitive. Despite the growing interest in how regulations impact innovation, few studies within the field of aquaculture have addressed the balancing act between tight environmental regulations and small and medium-sized enterprises' (SMEs') innovations for continued competitiveness. Here, SMEs refer to firms with less than 250 employees. To examine the innovation responses of firms, this paper applies an in-depth case study of four SMEs in the Norwegian salmon farming industry. We identify four innovation responses influenced by existing and anticipated regulations. These responses vary in terms of levels of innovation (incremental and radical), as well as ambitions and proactiveness towards innovations. When environmental regulations are uniformly imposed on all companies, smaller firms bear a disproportionate burden from these governmental regulations compared to their larger counterparts, particularly in their capacity to access regulatory incentives motivating radical innovation. However, our findings show that despite these constraints, some small firms pursue radical innovations, contrasting earlier studies on environmental regulations and innovation suggesting larger firms being the ones pursuing radical innovations in response to regulations. This study provides valuable insights for practice and policy regarding the regulatory regime of the Norwegian salmon farming industry and how and why different firms adapt to changing regulatory landscapes. • Innovations of small- and medium sized Norwegian salmon farming firms were studied. • The salmon farming companies respond to environmental regulations in various ways. • Some small firms are proactively oriented and pursue radical innovations.