The Relationship of Corporate Financial Performance and Innovation among Manufacturing Industries

• Main Authors: Chong, Charlaine T., Chua, Samantha R., Dy, Ma. Catrina S., Villavicencio, Antonio Miguel E.
• Format: text
• Published: Animo Repository 2016
• Subjects: Manufacturing; research; innovation; Technology and Innovation
• Online Access: https://animorepository.dlsu.edu.ph/res_aki/127; https://animorepository.dlsu.edu.ph/context/res_aki/article/1139/viewcontent/The_Relationship_of_Corporate_Financial_Performance_and_Innovation_among_Manufacturing_Industries.pdf
• Institution: De La Salle University

Innovation is becoming a critical determinant of the survival and advancement of firms. Despite this realization, there is a dearth of literature that tackles the subject matter and its specific role in corporate settings remains vague. Using corporate data on East and Southeast Asian manufacturing firms from 2008 to 2013, this study aims to identify the impact of corporate financial performance on research and development (R&D) expenditure as a measure of innovation. On the whole, the researchers utilized random effects (REM) and fixed effects (FEM) models to establish the relationship between R&D and corporate performance. The researchers, then, identified the factors that affected R&D. The researchers found that sales, profitability, and cash flow have positive relationships with R&D. Moreover, when firm size is considered, the researchers discovered that R&D determinants for large manufacturing firms were different - total profitability and liabilities and debt - from those of SMEs - number of employees and sales for SMEs.