Assessing the Transformative Power of Innovation on Business Performance in Private Sector Firms
Abstract
Empirical research underlines the importance of innovation concerning improving a firm's competitive advantage. However, research evidence attests to the fact that the impact of innovation has not been at the desired level in Norway in recent years. This dissertation, inspired by a unique curiosity about the Norwegian economy, is aware of this challenge and analyzes how innovation impacts the competitiveness of firms. It tries to fill this gap byanalyzing the transformative ability of innovation towards changing business performance regarding profitability, export-driven innovations, and technical efficiency. The study acknowledges the debate on the correlation between innovation and business performance, noting that benefits may be temporary or specific to certain performance metrics. It also recognizes that contextual factors and misapplication of innovation methods can influence innovation's transformative power.
Based on various econometric methods, the study explores the impact of innovation and its approaches on business performance in Norwegian private sector firms, using community innovation survey (CIS) data and accounting information. In this context, it conducts investigations, including dynamic analyses, to understand the time-bound effects of innovation. The findings reveal mixed impacts of innovation on business performance, contingent on the type of innovation and context. Moreover, how best export-led innovation improves is peculiar to the applicable firms' process approaches – the Science, Technology, and Innovation (STI) as well as Doing, Using, and Interacting (DUI) methods. Also, while profitability improves with disruptive innovation, disruptive and sustaining innovations enhance technical efficiency in manufacturing and service sectors. This view emphasizes disruptive innovation's profit potential and challenges the view that innovation's impact is primarily financial. The finding also reveals that innovation offers immediate and medium-term benefits to service firms in smaller economies, highlighting competition and market volatility constraints.
Methodologically, the dissertation adopts a "synthesis approach" that transcends traditional sectoral boundaries. The approach offers a holistic framework for analyzing how various innovation strategies (STI, DUI, disruptive, sustaining) influence business performance across multiple contexts. Theoretically, it enriches economic theory by revealing innovation's multi-dimensional effects beyond traditional financial indicators. The research shows how innovation enhances technical efficiency and export-led innovation for organizational effectiveness while challenging existing theories of innovation sources and impacts. Managerially, it emphasizes that successful innovation requires continuous adaptation to specific contextual requirements over fixed strategies. It stresses that the profit impacts of innovation may be constrained to medium-term horizons. This perception complements Schumpeter's dynamic economic theory, which states that ongoing innovation is essential to sustain performance in the long term. These contributions provide valuable suggestions for business managers in the evolving context of innovation. They also offer policies in support of varied innovative activities appropriate to unique contexts. By illustrating how innovation drives different dimensions of business performance across diverse contexts, the dissertation substantiates innovation's transformative power as necessary for sustainable economic growth.