An Analytical Framework for Innovation Determinants and Their Impact on Business Performance

Mahrukh Aslam, Imran Shafi, Jamil Ahmad, Roberto Marcelo Alvarez, Yini Miró, Emmanuel Soriano Flores and Imran Ashraf ()
Additional contact information
Mahrukh Aslam: Department of Computing and Technology, Abasyn University Islamabad Pakistan, Islamabad 44000, Pakistan
Imran Shafi: College of Electrical and Mechanical Engineering, National University of Sciences and Technology (NUST), Islamabad 44000, Pakistan
Jamil Ahmad: Hazara University, Mansehra 21300, Pakistan
Roberto Marcelo Alvarez: Higher Polytechnic School, Universidad Europea del Atlántico, Isabel Torres 21, 39011 Santander, Spain
Yini Miró: Higher Polytechnic School, Universidad Europea del Atlántico, Isabel Torres 21, 39011 Santander, Spain
Emmanuel Soriano Flores: Higher Polytechnic School, Universidad Europea del Atlántico, Isabel Torres 21, 39011 Santander, Spain
Imran Ashraf: Department of Information and Communication Engineering, Yeungnam University, Gyeongsan 38541, Republic of Korea

Sustainability, 2022, vol. 15, issue 1, 1-20

Abstract: Innovation plays a pivotal role in the progress and goodwill of an organization, and its ability to thrive. Consequently, the impact analysis of innovation on the performance of an organization holds great importance. This paper presents a two-stage analytical framework to examine the impact of business innovation on a firm’s performance, especially firms from the manufacturing sector. The prime objective is to identify the factors that have an impact on firm-level innovation, and to examine the impact of firm-level innovation on business performance. The framework and its analysis are based on the latest World Bank enterprise survey, with a sample size of 696 manufacturing firms. The first stage of the proposed framework establishes the analytical results through Bivariate Probit, which indicates that research and development (R&D) has a significantly positive impact on the product, process, marketing, and organizational innovations. It thus highlights the important role of the allocation of lump-sum amounts for R&D activities. The statistical analysis shows that innovation does not depend on the size of the firms. Moreover, the older firms are found to be wiser at conducting R&D than newer firms that are reluctant to take risks. The second stage of the proposed framework separately analyzes the impacts of the product and organizational innovation, and the process and marketing innovation on the firm performance, and finds them to be statistically significant and insignificant, respectively.

Keywords: innovation determinants; bivariate probit; data analysis; research and development (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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