Innovation and economic performance at the enterprise level

This study is an empirical investigation of the relationship between innovation and economic performance at the level of individual business units, or more precisely the enterprise level. It uses the data from the Norwegian innovation survey 1992 merged with accounting data for the period 1991-1997. At the same time the study has a methodological purpose, to check to see whether the indicators from the innovation survey seem to function well when confronted with empirical accounting data. The answer to this question is positive. We do find a number of clear and statistically highly significant associations between innovation variables and economic performance variables. Moreover, these associations mostly make good sense. This indicates that at least some of the innovation variables to a significant extent actually do measure what we want them to measure. The performance measures used in the study are growth in sales and total assets, as well as two different measures of profit ratio. For the two growth measures we find very clear and consistent positive associations with innovation variables throughout the whole period, from 1991 to 1997. The variables which make the most significant contribution here are especially innovation expenditures, but also the proportion of sales in 1992 accounted for by product innovations. For the two profit ratio measures, we find a very clear association with innovation variables for 1992, then some association for 1993, but no significant association after 1993. Here innovation expenditures make almost no significant contribution, but the proportion of sales in 1992 accounted for by product innovations does.