INNOVATION STRATEGY AND FINANCIAL PERFORMANCE IN MANUFACTURING COMPANIES: AN EMPIRICAL STUDY

INNOVATION STRATEGY AND FINANCIAL PERFORMANCE IN MANUFACTURING COMPANIES: AN EMPIRICAL STUDY An innovation strategy for the manufacturing function covers four areas: a firm's desired innovation leadership orientation (i.e., being a leader versus being a follower), its level of emphasis on process and product innovation, its use of internal and external sources of innovations, and its intensity of investment in innovation. We examine two models of the association between manufacturing companies' innovation strategy and their financial performance. The first examines the variations in company financial performance as a function of the simultaneous effect of the dimensions of innovation strategy. The second is a sequential model that suggests a causal sequence among the dimensions of innovation strategy that may lead to higher performance. We used data from a sample of 149 manufacturing companies to test the models. The results (1) support the importance of innovation strategy as a determinant of company financial performance, (2) suggest that both models are appropriate for examining the associations between the dimensions of innovation strategy and company performance, and (3) show that the sequential model provides additional insights into the indirect contribution of the individual dimensions of innovation strategy to company performance. Finally, we discuss the implications of these results for managers. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Production and Operations Management Wiley

INNOVATION STRATEGY AND FINANCIAL PERFORMANCE IN MANUFACTURING COMPANIES: AN EMPIRICAL STUDY

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Publisher
Wiley
Copyright
© 1993 Production and Operations Management Society
ISSN
1059-1478
eISSN
1937-5956
DOI
10.1111/j.1937-5956.1993.tb00036.x
Publisher site
See Article on Publisher Site

Abstract

An innovation strategy for the manufacturing function covers four areas: a firm's desired innovation leadership orientation (i.e., being a leader versus being a follower), its level of emphasis on process and product innovation, its use of internal and external sources of innovations, and its intensity of investment in innovation. We examine two models of the association between manufacturing companies' innovation strategy and their financial performance. The first examines the variations in company financial performance as a function of the simultaneous effect of the dimensions of innovation strategy. The second is a sequential model that suggests a causal sequence among the dimensions of innovation strategy that may lead to higher performance. We used data from a sample of 149 manufacturing companies to test the models. The results (1) support the importance of innovation strategy as a determinant of company financial performance, (2) suggest that both models are appropriate for examining the associations between the dimensions of innovation strategy and company performance, and (3) show that the sequential model provides additional insights into the indirect contribution of the individual dimensions of innovation strategy to company performance. Finally, we discuss the implications of these results for managers.

Journal

Production and Operations ManagementWiley

Published: Mar 1, 1993

References

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