The Value Relevance of Operational Innovation: Insights from the Perspective of Firm Life Cycle

Sang-Lyul Ryu and Jayoun Won
Additional contact information
Sang-Lyul Ryu: College of Business, Konkuk University, Seoul 05029, Korea
Jayoun Won: College of Global Business, Korea University, Sejong 30019, Korea

Sustainability, 2022, vol. 14, issue 4, 1-18

Abstract: This study investigates the effect of innovation on firm value at each stage of the firm life cycle (FLC): growth, mature and decline stages. Innovation involves improving the yield of input resources and creating new revenue sources. Thus, we define operational innovation as overall efficiency in business operations and divide the operational innovation into technical innovation and scale innovation. We adopt data envelopment analysis to measure a firm’s operational innovation and Dickinson’s method to determine the firm’s life cycle stage. The findings show that the effect of operational innovation on firm value differs among different stages of the firm life cycle, indicating that firms seeking value maximisation should improve the performance of technical innovation at the growth stage and that of scale innovation at the decline stage. In addition, technical innovation is positively related to the firm’s future value at every stage of its life cycle, signifying that the firm’s sustainability is associated with technical innovation rather than scale innovation. This study contributes to the existing literature by presenting the value relevance of the operational innovation that firms should pursue in each life cycle stage.

Keywords: operational innovation; firm life cycle; firm value; technical innovation; scale innovation; continuous improvement (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://www.mdpi.com/2071-1050/14/4/2058/pdf (application/pdf)
https://www.mdpi.com/2071-1050/14/4/2058/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:14:y:2022:i:4:p:2058-:d:747045

Access Statistics for this article

Sustainability is currently edited by Ms. Alexandra Wu

More articles in Sustainability from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().