Evaluating the Effects of Product Innovation on the Performance of European Firms by Using the Generalised Propensity Score

Abstract

The relationship between product innovation intensities and the performance of European firms is assessed, assuming that the selection into different intensities is based on a set of observed covariates. Most studies only distinguish between the innovating and non-innovating status of firms within a binary treatment framework. Instead, we use a generalised propensity score to estimate a dose-response function, which connects the product innovation intensities of the firms to their labour productivity and profitability growth rates, as measures of performance. The results indicate that high levels of product innovation intensity have significant positive effects on the profitability rate, whilst no significant effects are found on productivity rate. JEL classification: C10, C21, D22, D24, O30.

The role of product innovation and customer centricity in transforming tacit and explicit knowledge into profitability

“…Having established that not only tacit knowledge but also explicit knowledge is important for competitive advantage and profitability, the study then explores how tacit and explicit knowledge transform into firm profitability. Prior studies show that knowledge positively impacts product innovation (Gloet and Terziovski, 2004; Nonaka, 1994; Verona and Ravasi, 2003) which in turn impacts profitability (D’Attoma and Pacei, 2018; Deschamps and Nayak, 1993; Jajja et al , 2017). Knowledge management differences across firms explain a large part of differential in innovativeness and the differences in valuation of the firms (Stefani et al , 2019).…”

“…Perennially great companies are differentiated by their ability to produce never ending and profitable products through consistent innovation while others deliver sporadic new products that fail or are unprofitable (Deschamps and Nayak, 1993). So, there is a positive relationship between product innovation and firm performance (D’Attoma and Pacei, 2018; Jajja et al , 2017).…”

“…Despite this direct relationship between knowledge and profitability, previous research has shown that there are other variables that can also lead to firm profitability. Earlier studies show that knowledge positively impacts product innovation (Gloet and Terziovski, 2004; Nonaka, 1994; Verona and Ravasi, 2003) which in turn impacts profitability (D’Attoma and Pacei, 2018; Deschamps and Nayak, 1993; Jajja et al , 2017). Innovation is important for knowledge management practices to transform into superior firm performance (Byukusenge et al , 2016).…”

Analysis of SMEs performance based on innovation practice, market orientation, and innovation barriers

“…In addition, this study aims to investigate the factors that may prevent SMEs from pursuing innovation strategies and the impact of these barriers on SMEs' innovation practices and performance. This is because when talking about innovation, although many researchers recognize the importance of innovation for companies to be able to compete (D'Attoma & Pacei, 2016;Eggert et al, 2014), not all practitioners in companies want to do it. The reason is clear, because it takes a fairly large resource to do so.…”

Success or Waste of Taxpayer Money? Impact Assessment of Rural Development Programs in Hungary

“…In doing this, we built on recent advances in the applied econometrics of impact evaluation, as well as recent empirical studies using GPS. For example, highly disaggregated (firm-level) data was used by Bia and Mattei [25] to evaluate the effect of financial support allocated to Piedmont enterprises upon employment growth, while [26] analyzed the impact of product innovation intensity upon European companies-both approaches employ generalized propensity score matching. Closer to the present topic is research by Michalek and Ciaian [27], who used generalized propensity score methods to evaluate the capitalization of farm single payments into the land value in the EU and the research of Esposti [28], who used generalized propensity score matching to identify and estimate the response of farms to decoupling policy as a treatment effect.…”