How do firm- and industry-specific factors affect innovation and financial performance?
by Kalevi Kyläheiko; Kaisu Puumalainen; Satu Pätäri; Ari Jantunen
International Journal of Technology Intelligence and Planning (IJTIP), Vol. 11, No. 3, 2017

Abstract: Despite intensive research on competition and innovation, the relationship between firm-external industry conditions and the internal organisation of the firms as determinants of innovative outcomes and financial performance is still ambiguous. This paper empirically explores the interplay between the firm-specific and industry-specific sources of market imperfections as determinants of firms' innovation and financial performance. The basic research question is whether firm performance is determined primarily by firm internal or external explainers. The data are drawn from an extensive innovation survey, and we will also use data for measuring the competitiveness and profitability of the industries under scrutiny. We will empirically test our model with a sample of nearly 200 medium- and large-sized Finnish companies representing several industries. Our results indicate that firm-specific internal factors, especially appropriability-related intellectual property rights, partly explain innovation performance and also firm growth, whereas the market power-related external factors have low explanatory power.

Online publication date: Fri, 28-Jul-2017

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