Innovation and performance: some evidence from Italian firms

PURPOSE - This paper aims to explain through a statistical model the link between innovation and performance. The data taken into consideration is from Unicredit Group survey for the period 2004-2006 on Italian manufacturing firms.METHODOLOGY - We consider a broad concept of innovation: investments in R&D and technology, new processes, new products, innovation in terms of marketing and organization, investments in training of human resources. Performance is measured in terms of ROA without considering extraordinary items and taxes, to eliminate exceptional events and fiscal aspects.FINDINGS - With respect to innovation strategies, we find a weak, but significant, relationship between ROA and innovation. In addition, the influence of innovation on ROA does depend on innovation types and industry structures. Conversely, the amount of innovation expenditures does not have an influence on performance.LIMITATIONS - The main limitations of our analysis are represented by the missing values coming from the financial reporting in short form and by the consideration of a short time period (the year 2006), with reference to the innovation expenditures and the measurement of performance.IMPLICATIONS - From a managerial point of view, our model describing the relationship between innovation drivers and financial performance might represent a useful tool for managers aiming to introduce or implement innovation strategies in their organization. ORIGINALITY - Innovation is a common topic in econometric studies but not so much in managerial and accounting literature. The goal of the paper is to link macro and micro perspectives in a combined framework based on managerial and financial accounting.