Title: Innovations and firm performance: a study of the global airline industry

Authors: Jayalakshmy Ramachandran; Mamunur Rashid; Mohan V. Avvari

Addresses: Nottingham University Business School, University of Nottingham Malaysia, Jalan Broga, Semenyih 43500, Malaysia ' School of Business and Economics, Universiti Brunei Darussalam, Jalan Tungku Link, Gadong BE1410, Brunei ' Nottingham University Business School, University of Nottingham Malaysia, Jalan Broga, Semenyih, 43500 Malaysia

Abstract: The International Air Transport Association (IATA) reports that the impact of COVID-19 translates into a $630 billion reduction in tourism and travel related GDP and over 26 million job loss. This study examines how innovation influences company performance within the global airline industry covering the periods 2000 to 2020. Several fixed and random effect models and system-GMM approaches were employed. The findings indicate that higher investment in innovation helps increase profit margin and return on equity but reduces return on assets. Higher return from product development expenses (higher product development expenses) increases (decreases) profitability and efficiency of the company. Also, higher product development expense and profitability nexus indicates that companies may have to rely heavily on internal capital while financing for research and development (R&D). While national bailouts, mergers, climate change related sustainability agendas will be issues as airlines get back on slowly with the gradual opening of economies and vaccine miracle, the findings reported in this paper will bear significant policy implications for the sector overall.

Keywords: innovation; performance; airlines; return on equity; ROE; return on assets; ROAs; profit margin; agency; managerial efficiency; profitability; global; fixed and random effects.

DOI: 10.1504/IJMFA.2021.120522

International Journal of Managerial and Financial Accounting, 2021 Vol.13 No.3/4, pp.317 - 336

Received: 19 May 2021
Accepted: 31 Jul 2021
Published online: 24 Jan 2022 *

Full-text access for editors Full-text access for subscribers Purchase this article Comment on this article