Abstract
This study contributes to the stream of research that critically questions the relationship between innovation and firm’s growth performance. Using the 2019 World Bank Group enterprise survey data, Ordinary least square (OLS) and Quantile regression (QR) have been employed to examine the effect of various measures of innovation on the sales growth of Albanian firms. The two-regression analysis offer inconsistent results. OLS study results show that the adoption by firms of new processes is the only innovation measure that positively affects sales growth. Controversially, the more nuanced QR results show that the impact of innovation on sales growth is significant only for those firms located at the 90th percentiles. Product innovation and internal R&D appear to be the drivers of high-growth firms’ performance. Surprisingly, process innovation and external R&D have a negative impact on the growth performance of such firms. For the rest of the quantiles, the results show that innovation does not affect sales growth. Our study results show that innovation explanatory power is weak and noteworthy only for high-growth firms.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
References
Aghion, P., Bloom, N., Blundell, R., Griffith, R., & Howitt, P. (2005). Competition and innovation: An inverted-U relationship. The Quarterly Journal of Economics, 120(2), 701–728. https://doi.org/10.3386/w9269
Audretsch, D. B., Coad, A., & Segarra, A. (2014). Firm growth and innovation. Small Business Economics, 43(4), 743–749. https://doi.org/10.1007/s11187-014-9560-x
Banbury, C. M., & Mitchell, W. (1995). The effect of introducing important incremental innovations on market share and business survival. Strategic Management Journal, 16(Special issue), 161–182. https://doi.org/10.1002/smj.4250160922
Becchetti, L., & Trovato, G. (2002). The determinants of growth for small and medium sized firms. The role of the availability of external finance. Small Business Economics, 19(4), 291–306. https://doi.org/10.1023/A:1019678429111
Bianchini, S., Pellegrino, G., & Tamagni, F. (2018). Innovation complementarities and firm growth. Industrial and Corporate Change, 27(4), 657–676. https://doi.org/10.1093/icc/dty008
Bottazzi, G., Coad, A., Jacoby, N., & Secchi, A. (2005). Corporate growth and industrial dynamics: Evidence from French manufacturing. Applied Economics, 43(1), 103–116. https://doi.org/10.1080/00036840802400454
Bottazzi, G., Dosi, G., Lippi, M., Pammolli, F., & Riccaboni, M. (2001). Innovation and corporate growth in the evolution of the drug industry. International Journal of Industrial Organization, 19(7), 1161–1187. https://doi.org/10.1016/S0167-7187(01)00068-6
Brouwer, E., & Kleinknecht, A. (1999). Innovative output, and a firm’s propensity to patent: An exploration of CIS micro data. Research Policy, 28(6), 615–624. https://doi.org/10.1016/S0048-7333(99)00003-7
Buchinsky, M. (1998). Recent advances in quantile regression models: A practical guideline for empirical research. Journal of Human Resources, 33(1), 88–126. https://doi.org/10.2307/146316
Coad, A. (2009). The growth of firms: A survey of theories and empirical evidence. Cheltenham: Edward Elgar Publishing.
Coad, A., & Rao, R. (2008). Innovation and firm growth in high tech sectors: A quantile regression approach. Research Policy, 37(4), 633–648. https://doi.org/10.1016/j.respol.2008.01.003
Coad, A., & Rao, R. (2011). The firm-level employment effects of innovations in high-tech US manufacturing industries. Journal of Evolutionary Economics, 21(2), 255–283. https://doi.org/10.1007/s00191-010-0209-x
Coad, A., Segarra, A., & Teruel, M. (2013). Like milk or wine: Does firm performance improve with age? Structural Change and Economic Dynamics, 24(1), 173–189. https://doi.org/10.1016/j.strueco.2012.07.002
Coad, A., Segarra, A., & Teruel, M. (2016). Innovation and firm growth: Does firm age play a role? Research Policy, 45(2), 387–400. https://doi.org/10.1016/j.respol.2015.10.015
Cohen, W. M., & Klepper, S. (1996). Firm size and the nature of innovation within industries: The case of process and product R&D. The Review of Economics and Statistics, 78(2), 232–243. https://doi.org/10.2307/2109925
Cohen, W., Nelson, R., & Walsh, J. (2000). Protecting their intellectual assets: Appropriability conditions and why US manufacturing firms patent (or not). NBER working paper no 7552. https://doi.org/10.3386/w7552
Cooper, R., & Kleinschmidt, E. (1987). New products: What separates winners from losers? Journal of Product Innovation Management, 4(3), 169–184. https://doi.org/10.1016/0737-6782(87)90002-6
Damanpour, F. (1991). Organizational innovation: A metaanalysis of effects of determinants and moderators. Academy of Management Journal, 34(3), 555–590. https://doi.org/10.2307/256406
Deeds, L. (2001). The role of R&D intensity, technical development and absorptive capacity in creating entrepreneurial wealth in high technology start-ups. Journal of Engineering and Technology Management, 18(1), 29–47. https://doi.org/10.1016/S0923-4748(00)00032-1
Demirel, P., & Mazzucato, M. (2013). Innovation and economic performance (industrial and financial): Recent results and questions for future research. Innovation and finance. Routledge.
Edquist, C. (2001). Innovation policy: A systemic approach. In D. Archibugi & B. A. Lundvall (Eds.), The globalising learning economy (pp. 219–238). Oxford: Oxford University Press.
Freel, M., & Robson, P. (2004). Small firm innovation, growth and performance evidence from Scotland and Northern England. International Small Business Journal, 22(6), 561–575. https://doi.org/10.1177/0266242604047410
Geroski, P. A. (2000). The growth of firms in theory and practice. In N. Foss & V. Mahnke (Eds.), New directions in economic strategy research. Oxford: Oxford University Press.
Geroski, P., & Mazzucato, M. (2002). Learning and the sources of corporate growth. Industrial and Corporate Change, 11(4), 623–644. https://doi.org/10.1093/icc/11.4.623
Guarascioa, D., & Tamagni, F. (2019). Persistence of innovation and patterns of firm growth. Research Policy, 48(6), 1493–1512. https://doi.org/10.1016/j.respol.2019.03.004
Hervas-Oliver, J. L., Sempere-Ripoll, F., & Boronat-Moll, C. (2014). Process innovation strategy in SMEs, organizational innovation and performance: A misleading debate? Small Business Economics, 43(4), 873–886. https://doi.org/10.1007/s11187-014-9567-3
Johannessen, J. A., Olsen, B., & Lumpkin, G. T. (2001). Innovation as newness: What is new, how new, and new to whom? European Journal of Innovation Management, 4(1), 20–31. https://doi.org/10.1108/14601060110365547
Krishnan, V., & Ulrich, K. (2001). Product development decisions: A review of the literature. Management Science, 47(1), 1–21. https://doi.org/10.1287/mnsc.47.1.1.10668
Lööf, H., & Heshmati, A. (2006). On the relationship between innovation and performance: A sensitivity analysis. Economics of Innovation and New Technology, 15(4/5), 317–344. https://doi.org/10.1080/10438590500512810
McKelvie, A., Brattström, A., & Wennberg, K. (2017). How young firms achieve growth: Reconciling the roles of growth motivation and innovative activities. Small Business Economics, 49(2), 273–293. https://doi.org/10.1007/s11187-017-9847-9
Na, K., & Kang, Y.-H. (2019). Relations between innovation and firm performance of manufacturing firms in Southeast Asian emerging markets: Empirical evidence from Indonesia, Malaysia, and Vietnam. Journal of Open Innovation: Technology, Market, and Complexity, 5(4), 98. https://doi.org/10.3390/joitmc5040098
Nelson, R., & Winter, S. (1982). An evolutionary theory of economic change. Cambridge: The Belknap Press of Harvard University Press.
Papinniemi, J. (1999). Creating a model of process innovation for reengineering of business and manufacturing. International Journal of Production Economics, 60–61, 95–101. https://doi.org/10.1016/S0925-5273(98)00146-7
Parisi, M., Schiantarelli, F., & Sembenelli, A. (2006). Productivity innovation and R&D: Micro evidence for Italy. European Economic Review, 50(8), 2037–2061. https://doi.org/10.1016/j.euroecorev.2005.08.002
Roper, S. (1997). Product innovation and small business growth: A comparison of the strategies of German, UK and Irish companies. Small Business Economics, 9(6), 523–537. https://doi.org/10.1023/A:1007963604397
Santi, C., & Santoleri, P. (2017). Exploring the link between innovation and growth in Chilean firms. Small Business Economics, 49(2), 445–467. https://doi.org/10.1007/s11187-016-9836-4
Schumpeter, J. (1934). The theory of economic development. Cambridge: Harvard University Press.
Segarra, A., & Teruel, M. (2014). High-growth firms and innovation: An empirical analysis for Spanish firms. Small Business Economics, 43(4), 805–821. https://doi.org/10.1007/s11187-014-9563-7
Vivarelli, M. (2014). Innovation, employment and skills in advanced and developing countries: A survey of economic literature. Journal of Economic Issues, 48(1), 123–154. https://doi.org/10.2753/JEI0021-3624480106
World Bank Albania. (2019). Enterprise Survey (ES) World Ban Ref. ALB_2019_ES_v01_M. Retrieved March, 2020, from https://www.enterprisesurveys.org/portal/login.aspx
Yasuda, T. (2005). Firm growth, size, age and behavior in Japanese manufacturing. Small Business Economics, 24(1), 1–15. https://doi.org/10.1007/s11187-005-7568-y
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2021 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this paper
Cite this paper
Gerdoçi, B., Dibra, S. (2021). Innovation and Sales Growth Among Heterogeneous Albanian Firms: A Quantile Approach. In: Tsounis, N., Vlachvei, A. (eds) Advances in Longitudinal Data Methods in Applied Economic Research. ICOAE 2020. Springer Proceedings in Business and Economics. Springer, Cham. https://doi.org/10.1007/978-3-030-63970-9_11
Download citation
DOI: https://doi.org/10.1007/978-3-030-63970-9_11
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-63969-3
Online ISBN: 978-3-030-63970-9
eBook Packages: Economics and FinanceEconomics and Finance (R0)