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Whether innovation focused companies invest more in working capital: evidence from India

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  • Kumar Sanjay Sawarni
  • Sivasankaran Narayanasamy
  • Naresh Gopal
  • Ankur Shukla

Abstract

This research explores the differences in working capital management (WCM) practices between companies with a high innovation focus (HIFCs) and those with a low innovation focus (LIFCs). It investigates the impact of innovation on WCM and its components, such as inventory, receivables, and payables management. Using independent samples t-tests, the study compares WCM differences between HIFCs and LIFCs, while fixed-effect regression assesses the impact of innovation on WCM. The analysis covers 2,968 firm-years of Indian companies. The findings reveal that HIFCs invest more in working capital and exhibit longer cash conversion cycles (CCC), inventory days (IND), receivable days (ARD), and payable days (APD) compared to LIFCs. The study further demonstrates that enhanced innovation activities lead to longer CCC, IND, ARD, and APD. These insights can help managers integrate these factors into financial planning and budgeting processes, facilitating the efficient management of the financial and operational challenges posed by innovation.

Suggested Citation

  • Kumar Sanjay Sawarni & Sivasankaran Narayanasamy & Naresh Gopal & Ankur Shukla, 2026. "Whether innovation focused companies invest more in working capital: evidence from India," International Journal of Managerial and Financial Accounting, Inderscience Enterprises Ltd, vol. 18(3), pages 251-273.
    • Handle: RePEc:ids:injmfa:v:18:y:2026:i:3:p:251-273
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