Does Innovation Promote Performance? Evidence from Developed Economies During Crises

Abstract

This study examines the relationship between firm performance and innovation levels of Information Technology and Communication (ICT), covering 886 firms from five developed countries during the period 2000-2020. The results indicate a positive association between the accessibility and/or the use of ICTs and firms’ innovation performance. More precisely, the positive relationship between ICTs and firm performance is highly pronounced in small-sized firms and strongly related to R&D decisions in large firms. However, during the recession period, the relationship between performance and innovation level is affected differently by the financial crisis, leading to contradictory results. Interestingly, the pandemic crisis has had a positive impact on the firm’s performance-innovation relationship. Despite high rates of ICT diffusion, the results of performance and innovation cannot be considered universal due to the significant differences between countries. Our findings may contribute to the literature by highlighting how variations in ICT impact firms’ innovation performance across countries, particularly during crises.

Keywords: Information and Communication Technology, Performance, Innovation, Financial Crisis, Pandemic Crisis.

DOI: 10.7176/RJFA/14-19-03

Publication date: November 30^th 2023