A Longitudinal Study of the Impact of R&D, Patents, and Product Innovation on Firm Performance
Because of increasing levels of competition and decreasing product life cycles, a firm’s ability to generate a continuous stream of innovations may be more important than ever in allowing a firm to improve profitability and maintain competitive advantage.
First, the relationship between a firm’s commitment to research and development and its innovative outcomes is examined.
Two innovative outcomes are analyzed: (1) invention, which focuses on the development of new ideas; and (2) innovation, the development of commercially viable products or services from creative ideas.
Invention is measured by the number of patents granted, and innovation is assessed by the number of new product announcements.
Second, because many inventions ultimately result in marketable innovations and because patents may provide protection for new products, the relationship between patents and product announcements is also investigated.
Finally, the ability of a firm to benefit from its inventions and innovations is studied by examining their separate effects on firm performance, measured as return on assets (ROA) and sales growth.