Title:
Impact of
Technological Innovation Capabilities on The Market Value of Firms
Abstract: In the era of
globalization and with the advent of knowledge economies,
organizational innovation has assumed a critical role in enhancing
economic performance of firms. Proponents of the “Resource Based View”
of the firm and its more recent extensions such as the “Knowledge Based
View” and “Dynamic Capabilities Theory” have suggested that
generation, diffusion and application of organizational knowledge could
be the source of sustained competitive advantage and superior
performance of firms. Innovation has also been found to enhance new
product development, increase profitability of a firm, improve export
performance of a firm, and act as a competitive barrier. While there is near
unanimity in accepting the vital role of innovation in a firm’s
performance, consensus on what constitutes organizational innovation
and how to measure it has proven to be elusive so far. Most previous
research in this area has conceptualized innovation through one or more
dimensions of a firm’s innovative capability such as R&D of a
firm. The measurement of the construct has thus reflected this
narrow conceptualization with a single measure such as R&D
expenditure of a firm being the most often used proxy. This study utilizes a
broader definition of organizational innovation capabilities that
includes the generation, dissemination and strength of innovative
activity in a firm. Such a composite measure is then used to predict
market value of a firm. The unique features
of this study are that it uses multiple indicators of firm innovation,
it uses panel (cross sectional, time series) data on a firm’s
innovation profile along with lagged measures of market value. It also
utilizes a fixed effect panel data research methodology in order to
significantly improve external validity of the results.
Authors: Madan
Annavarjula, Ramesh Mohan, and Sam Beldona