Do innovation-activity and regional economic complexity lead to greater stability of companies?

Konstantin Grasmik, Ca’Foscari University of Venice, Italy

Abstract/Description

This paper is concerned with firm sustainable development. Does innovation activity stipulate more sustainable development of a firm which means that a firm could resist more successfully to economic crisis? Or innovation-active companies have better performance only in good time but when economic conditions worsen dramatically they become more vulnerable than non-innovative companies? So the research question is to analyze how adherence to innovation strategy influences firm sustainability in short-term and mid-term periods. And economic crisis is a good occasion to check validity of a firm strategy. The aim of this paper is to analyze if innovation activity of individual companies and regions where companies are situated influences its performance. We hypothesize that if a firm is innovation-active it performs worse in short-term period only. In mid-term its performance is the same or better as of non-innovation companies. Also we test hypotheses on the impact of the regional knowledge –exploitation and knowledge-exploration competences and regional economic complexity on firm development. To test these propositions panel dataset of 227 companies for seven years was compiled. Results indicate that economic crisis influence innovation-active firms harder than non-innovation ones but the influence is opposite to hypotheses. Innovation-active firms are resilient to the economic crisis in short-term period but perform worse in mid-term. Regional knowledge-exploitation and knowledge-exploration capacities do not influence significantly firm performance but if regional innovation system possesses both competences its impact is significant and positive. Influence of regional economic complexity is ambivalent and depends on the type of model. In models with RE economic complexity of ith region influences negatively and indirect impact of other regions is insignificant. For FE-models results are opposite.

 
Apr 2nd, 2:30 PM Apr 2nd, 4:00 PM

Do innovation-activity and regional economic complexity lead to greater stability of companies?

This paper is concerned with firm sustainable development. Does innovation activity stipulate more sustainable development of a firm which means that a firm could resist more successfully to economic crisis? Or innovation-active companies have better performance only in good time but when economic conditions worsen dramatically they become more vulnerable than non-innovative companies? So the research question is to analyze how adherence to innovation strategy influences firm sustainability in short-term and mid-term periods. And economic crisis is a good occasion to check validity of a firm strategy. The aim of this paper is to analyze if innovation activity of individual companies and regions where companies are situated influences its performance. We hypothesize that if a firm is innovation-active it performs worse in short-term period only. In mid-term its performance is the same or better as of non-innovation companies. Also we test hypotheses on the impact of the regional knowledge –exploitation and knowledge-exploration competences and regional economic complexity on firm development. To test these propositions panel dataset of 227 companies for seven years was compiled. Results indicate that economic crisis influence innovation-active firms harder than non-innovation ones but the influence is opposite to hypotheses. Innovation-active firms are resilient to the economic crisis in short-term period but perform worse in mid-term. Regional knowledge-exploitation and knowledge-exploration capacities do not influence significantly firm performance but if regional innovation system possesses both competences its impact is significant and positive. Influence of regional economic complexity is ambivalent and depends on the type of model. In models with RE economic complexity of ith region influences negatively and indirect impact of other regions is insignificant. For FE-models results are opposite.