Title: Whether innovation focused companies invest more in working capital: evidence from India

Authors: Kumar Sanjay Sawarni; Sivasankaran Narayanasamy; Naresh Gopal; Ankur Shukla

Addresses: T.A. Pai Management Institute, Manipal Academy of Higher Education, Manipal, India ' XLRI Xavier School of Management, Jamshedpur, India ' Indian Institute of Management, Tiruchirappalli, India ' BML Munjal University, Gurugram, India

Abstract: This research explores the differences in working capital management (WCM) practices between companies with a high innovation focus (HIFCs) and those with a low innovation focus (LIFCs). It investigates the impact of innovation on WCM and its components, such as inventory, receivables, and payables management. Using independent samples t-tests, the study compares WCM differences between HIFCs and LIFCs, while fixed-effect regression assesses the impact of innovation on WCM. The analysis covers 2,968 firm-years of Indian companies. The findings reveal that HIFCs invest more in working capital and exhibit longer cash conversion cycles (CCC), inventory days (IND), receivable days (ARD), and payable days (APD) compared to LIFCs. The study further demonstrates that enhanced innovation activities lead to longer CCC, IND, ARD, and APD. These insights can help managers integrate these factors into financial planning and budgeting processes, facilitating the efficient management of the financial and operational challenges posed by innovation.

Keywords: working capital management; WCM; cash conversion cycle; inventory days; IND; accounts receivable days; ARD; accounts payable days; innovation; research and development; R&D.

DOI: 10.1504/IJMFA.2026.154818

International Journal of Managerial and Financial Accounting, 2026 Vol.18 No.3, pp.251 - 273

Received: 14 Nov 2023
Accepted: 08 Aug 2024
Published online: 15 Jul 2026 *

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