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The Effect of Innovation Capability on Business Performance: A Focus on IT and Business Service Companies

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  • Seung Hoo Jin

    (Science and Technology Studies, Korea University, Seoul 02841, Korea)

  • Sang Ok Choi

    (Department of Public Administration, Korea University, Seoul 02841, Korea)

Abstract

With the introduction of a wide variety of new technologies during the fourth industrial revolution, companies in Korea have attempted to enhance their innovation activities, which include investment in new technology adoption, technical and non-technical innovation factors, and Research & Development (R&D) activity, to ensure the development and growth of their business performance and sustainability. In particular, IT and business services, two important industries in Korea, have been impacted by the development of new technology and have sought to adopt new technologies as soon as possible to survive in a rapidly changing business environment. The aim of our study is to empirically explore the effect of innovation activities on the performance of Korean IT and business service companies. To achieve this aim, we examine the innovation activities and business performance of 160 companies (80 large companies and 80 small- and medium-sized enterprises (SMEs)) in the IT and business service industries in Korea from 2009 to 2017. This study empirically analyzes panel data using fixed effect and random effect models with Hausman tests. According to our results, an improvement in product innovation has a positive impact on business performance (i.e., revenue and labor productivity) in both large companies and SMEs, as does R&D investment, research resources, and company age. However, an improvement in process innovation only has a positive impact on the business performance of large companies, and R&D cooperation only has a positive impact on the business performance of SMEs. As a result, both large companies and SMEs should concentrate on technological innovations to improve their sustainability and thus ensure their success in the long term.

Suggested Citation

  • Seung Hoo Jin & Sang Ok Choi, 2019. "The Effect of Innovation Capability on Business Performance: A Focus on IT and Business Service Companies," Sustainability, MDPI, vol. 11(19), pages 1-15, September.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:19:p:5246-:d:270408
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    3. Alicia Llorca-Ponce & Gregorio Rius-Sorolla & Francisco J. Ferreiro-Seoane, 2021. "Is Innovation a Driver of Sustainability? An Analysis from a Spanish Region," Sustainability, MDPI, vol. 13(16), pages 1-30, August.
    4. Cuevas-Vargas, Héctor & Aguirre, Joao & Parga-Montoya, Neftalí, 2022. "Impact of ICT adoption on absorptive capacity and open innovation for greater firm performance. The mediating role of ACAP," Journal of Business Research, Elsevier, vol. 140(C), pages 11-24.
    5. Salma S. Abed, 2021. "Women Entrepreneurs’ Adoption of Mobile Applications for Business Sustainability," Sustainability, MDPI, vol. 13(21), pages 1-15, October.
    6. Kim, Sangil & Park, Keon Chul, 2021. "Government funded R&D collaboration and it's impact on SME's business performance," Journal of Informetrics, Elsevier, vol. 15(3).
    7. Ilir Morina, 2021. "The Impact of Innovation and Knowledge Management on Enterprises Revenues in Serbia," European Research Studies Journal, European Research Studies Journal, vol. 0(4B), pages 838-850.
    8. Chang Hee Yoon & Francis Joseph Costello & Cheong Kim, 2019. "Assisting Sustainable Entrepreneurial Activities Through the Analysis of Mobile IT Services’ Success and Failure Factors," Sustainability, MDPI, vol. 11(20), pages 1-22, October.
    9. Benny Lianto, 2023. "Identifying Key Assessment Factors for a Company’s Innovation Capability Based on Intellectual Capital: An Application of the Fuzzy Delphi Method," Sustainability, MDPI, vol. 15(7), pages 1-21, March.
    10. Ilir Morina, 2021. "The Impact of Innovation and Knowledge Management on Enterprises’ Revenues in Serbia," European Research Studies Journal, European Research Studies Journal, vol. 0(4), pages 905-917.
    11. Ilir Morina, 2022. "The Impact of Innovation and Knowledge Management on Enterprises Revenues in Serbia," International Journal of Economics & Business Administration (IJEBA), International Journal of Economics & Business Administration (IJEBA), vol. 0(1), pages 15-28.
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