THE EFFECT OF INNOVATION ON THE FINANCIAL PERFORMANCE AND EXPORT INTENSITY OF FIRMS IN EMERGING COUNTRIES

Quelhas, Filipe de Castro

doi:10.5902/1983465938078

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Articles • Rev. Adm. UFSM 14 (spe) • Nov 2021 • https://doi.org/10.5902/1983465938078 copy

THE EFFECT OF INNOVATION ON THE FINANCIAL PERFORMANCE AND EXPORT INTENSITY OF FIRMS IN EMERGING COUNTRIES

O EFEITO DA INOVAÇÃO NO DESEMPENHO FINANCEIRO E NA INTENSIDADE DAS EXPORTAÇÕES DE EMPRESAS EM PAÍSES EMERGENTES

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

Purpose

What impact does innovation have on the financial performance and export intensity of firms in emerging countries?

Design/methodology/approach

This contribution is the result of an analysis of five years’ data (2008-2012) from a multinational survey conducted with 140 predominantly manufacturing firms from Brazil, Russia, India, China.

Findings -

In contrast with the prevailing literature, the results reveal strong positive correlations between the principal study variables.

Originality/value

Studies of this subject have found contradictory results with regard to the effect of innovation on firm performance. Only a minority of these studies have operationalized their investigations using historical data from a range of different countries and fewer still have focused on emerging countries.This article contributes to the debate by reporting the effects of innovation activity by firms from emerging countries on their financial performance and export intensity.

Keywords:
Innovation; financial performance; export intensity

Group	Variable	Operational definition	Availability of data	Type	Measure	Coding of binary and discrete variables
Primary study variables	ROA	Return on assets	Annual	Discrete	0.1.2,…11	-100~-81%=0, -80~-61%=1,…81~100%=11
	ROE	Return on equity	Annual	Discrete	0.1.2,…11	-100~-81%=0, -80~-61%=1,…81~100%=11
	ROS	Return on sales	Annual	Discrete	0.1.2,…11	-100~-81%=0, -80~-61%=1,…81~100%=11
	PATINT	Number of international patents	Annual	Continuous	No limits	-
	PATINT2	Number of international patents squared
	PATDOM	Number of domestic patents	Annual	Continuous	No limits	-
	PATDOM2	Number of domestic patents squared
	EXPORT	Exports as percentage of total sales	Annual	Discrete	0.1.2,…10	0%=0.1~10%=1, 11~20%=2,…91~100%=10
Firm level control variables	FIRMSIZE	Number of employees	Fixed	Continuous	No limits	-
	FORPAR	Foreign shareholder	Fixed	Binary	0.1	No=0, Yes=1
	FIRMAGE	Year firm founded	Fixed	Continuous	No limits	-
	GOVPAR	Government shareholder	Fixed	Binary	0.1	No=0, Yes=1
	CEOEDU	CEO’s educational level	Annual	Categorical	0, 1, 2, 3	0=No degree, 1=bachelor’s degree, 2=masters, 3=doctorate
	EMPEDU	Percentage of employees with degree	Annual	Discrete	0.1.2,…10	0%=0.1~10%=1, 11~20%=2,…91~100%=10
	XDIFIC	Assessment of difficulty of competing in international market compared to domestic	Fixed	Binary	0.1	0=domestic market is more difficult, 1= international market is more difficult
	XYEAR	Year first exported	Fixed	Continuous	No limits	-
	XINTER	Level of interest in export markets	Fixed	Categorical	0.1.2.3	Very negative=0, Negative=1, Positive=2 Very positive=3
	XPROF	Assessment of profitability of international market compared to domestic	Fixed	Binary	0.1	0=domestic market is more difficult, 1= international market is more difficult
Binary country control variables	BRAZIL	Brazilian firm	Fixed	Binary	0.1	No=0, Yes=1
	RUSSIA	Russian firm	Fixed	Binary	0.1	No=0, Yes=1
	INDIA	Indian firm	Fixed	Binary	0.1	No=0, Yes=1
	CHINA	Chinese firm	Fixed	Binary	0.1	No=0, Yes=1
Binary year control variables	YR2008	Year 2008	Fixed	Binary	0.1	No=0, Yes=1
	YR2009	Year 2009	Fixed	Binary	0.1	No=0, Yes=1
	YR2010	Year 2010	Fixed	Binary	0.1	No=0, Yes=1
	YR2011	Year 2011	Fixed	Binary	0.1	No=0, Yes=1
	YR2012	Year 2012	Fixed	Binary	0.1	No=0, Yes=1
Binary industry control variables	AERO	Aerospace industry	Fixed	Binary	0.1	No=0, Yes=1
	AUTO	Automotive industry	Fixed	Binary	0.1	No=0, Yes=1
	CHEM	Chemicals industry	Fixed	Binary	0.1	No=0, Yes=1
	ELECTR	Electrical and electronics industry	Fixed	Binary	0.1	No=0, Yes=1
	CONGOOD	Consumer goods industry	Fixed	Binary	0.1	No=0, Yes=1
	MACH	Machinery industry	Fixed	Binary	0.1	No=0, Yes=1
	METAL	Metalworking industry	Fixed	Binary	0.1	No=0, Yes=1
	PHARM	Pharmaceutical industry	Fixed	Binary	0.1	No=0, Yes=1
	SHIP	Shipbuilding industry	Fixed	Binary	0.1	No=0, Yes=1
	ETC	Other industries	Fixed	Binary	0.1	No=0, Yes=1

Variable	Observations	Mean	Standard deviation	Minimum	Maximum
ROA	700	6.453	2.001	0	11
ROE	700	6.321	2.133	0	11
ROS	700	6.609	2.008	0	11
EXPORT	700	3.551	2.729	0	10
PATINT	700	8.267	33.398	0	500
PATINT2	700	1182.159	11949.380	0	250000
PATDOM	700	16.071	48.898	0	535
PATDOM2	700	2645.863	18335.110	0	286225
FIRMSIZE	700	2607.657	11037.230	10	125000
FIRMAGE	700	24.086	21.592	6	155
FORPAR	700	0.407	0.492	0	1
GOVPAR	700	0.257	0.437	0	1
CEOEDU	700	1.841	0.767	0	3
EMPEDU	700	4.310	2.542	0	10
XDIFIC	700	0.679	0.467	0	1
XYEAR	700	13.279	13.557	0	88
XINTER	700	2.364	0.689	0	3
XPROF	700	0.629	0.484	0	1
BRAZIL	700	0.086	0.280	0	1
RUSSIA	700	0.286	0.452	0	1
INDIA	700	0.393	0.489	0	1
CHINA	700	0.236	0.425	0	1
YR2008	700	0.200	0.400	0	1
YR2009	700	0.200	0.400	0	1
YR2010	700	0.200	0.400	0	1
YR2011	700	0.200	0.400	0	1
YR2012	700	0.200	0.400	0	1
AERO	700	0.014	0.119	0	1
AUTO	700	0.121	0.327	0	1
CHEM	700	0.129	0.335	0	1
ELECTR	700	0.193	0.395	0	1
CONGOOD	700	0.214	0.411	0	1
MACH	700	0.179	0.383	0	1
METAL	700	0.079	0.269	0	1
PHARM	700	0.021	0.145	0	1
SHIP	700	0.007	0.084	0	1
ETC	700	0.043	0.203	0	1

	ROA	ROE	ROS	EXPORT	PATINT	PATDOM	FIRMSIZE	FIRMAGE	FORPAR	GOVPAR	CEOEDU	EMPEDU	XDIFIC	XYEAR	XINTER	XPROF
ROA	1
ROE	0.768*	1
ROS	0.701*	0.635*	1
EXPORT	0.408*	0.359*	0.319*	1
PATINT	0.221*	0.224*	0.223*	0.264*	1
PATDOM	0.064	0.103*	0.081*	0.177*	0.569*	1
FIRMSIZE	0.115*	0.083*	0.053	0.053	0.007	0.039	1
FIRMAGE	0.067	0.122*	0.093*	0.019	-0.034	0.114*	0.031	1
FORPAR	0.045	0.001	-0.015	0.410*	0.169*	0.153*	0.162*	0.089*	1
GOVPAR	-0.053	-0.079*	0.044	0.123*	0.055	0.097*	0.001	0.168*	0.277*	1
CEOEDU	0.040	0.047	0.120*	0.194*	0.134*	0.156*	0.104*	0.153*	0.106*	0.130*	1
EMPEDU	0.261*	0.278*	0.282*	0.368*	0.221*	0.137*	-0.003	0.075*	0.171*	0.174*	0.258*	1
XDIFIC	0.119*	0.142*	0.129*	0.020	0.097*	0.048	0.053	0.145*	-0.052	0.020	0.188*	0.097*	1
XYEAR	0.052	0.080*	0.075*	0.197*	0.027	0.148*	0.078*	0.793*	0.136*	0.129*	0.224*	0.088*	0.142*	1
XINTER	0.072	0.026	0.068	0.416*	0.072	0.093*	0.057	0.101*	0.321*	0.068	0.106*	0.086*	0.119*	0.176*	1
XPROF	0.033	0.020	0.034	0.199*	-0.058	0.053	0.012	-0.070	0.035	0.046	0.118*	-0.102*	0.040	-0.080*	0.363*	1

Variables	ROA			ROE			ROS
Variables	Model 1	Model 2	Model 3	Model 4	Model 5	Model 6	Model 7	Model 8	Model 9
PATINT	0.013***	0.011***	0.011***	0.014***	0.012***	0.013***	0.013***	0.011***	0.010***
PATINT	(0.001)	(0.001)	(0.002)	(0.002)	(0.002)	(0.002)	(0.002)	(0.001)	(0.002)
FIRMSIZE		2.21e-05***	2.45e-05***		1.82e-05***	1.99e-05***		1.21e-05***	1.49e-05***
FIRMSIZE		(3.01e-06)	(3.30e-06)		(3.04e-06)	(3.63e-06)		(2.63e-06)	(3.08e-06)
FIRMAGE		0.008***	0.006*		0.014***	0.014***		0.008***	0.008***
FIRMAGE		(0.002)	(0.003)		(0.002)	(0.003)		(0.002)	(0.003)
FORPAR		-0.082	-0.303*		-0.265*	-0.492***		-0.453***	-0.718***
FORPAR		(0.157)	(0.170)		(0.159)	(0.175)		(0.155)	(0.177)
GOVPAR		-0.497***	-0.389**		-0.674***	-0.632***		0.0199	0.179
GOVPAR		(0.187)	(0.185)		(0.187)	(0.188)		(0.180)	(0.189)
CEOEDU		-0.158	-0.146		-0.163	-0.156		0.0547	0.058
CEOEDU		(0.104)	(0.104)		(0.109)	(0.112)		(0.094)	(0.099)
EMPEDU		0.198***	0.184***		0.229***	0.208***		0.195***	0.188***
EMPEDU		(0.031)	(0.033)		(0.033)	(0.037)		(0.031)	(0.033)
Country control	No	No	Yes	No	No	Yes	No	No	Yes
Year control	No	No	Yes	No	No	Yes	No	No	Yes
Industry control	No	No	Yes	No	No	Yes	No	No	Yes
Constant	6.343***	5.693***	7.728***	6.203***	5.389***	6.790***	6.498***	5.508***	5.674***
Constant	(0.076)	(0.196)	(0.458)	(0.081)	(0.219)	(0.456)	(0.0758)	(0.201)	(0.574)
Observations	700	700	700	700	700	700	700	700	700
R ²	0.049	0.130	0.207	0.051	0.154	0.220	0.050	0.128	0.196

Variables	ROA			ROE			ROS
Variables	Model 2.1	Model 2.2	Model 2.3	Model 2.4	Model 2.5	Model 2.6	Model 2.7	Model 2.8	Model 2.9
PATDOM	0.003**	0.001	0.002*	0.003**	0.001	0.002*	0.003**	0.001	0.002*
	(0.001)	(0.001)	(0.001)	(0.001)	(0.001)	(0.001)	(0.001)	(0.001)	(0.001)
FIRMSIZE		1.13e-05***	1.35e-05***		1.13e-05***	1.35e-05***		1.13e-05***	1.35e-05***
		(0.000)	(0.000)		(0.000)	(0.000)		(0.000)	(0.000)
FIRMAGE		0.006**	0.007**		0.006**	0.007**		0.006**	0.007**
		(0.003)	(0.003)		(0.003)	(0.003)		(0.003)	(0.003)
FORPAR		-0.363**	-0.605***		-0.363**	-0.605***		-0.363**	-0.605***
		(0.157)	(0.179)		(0.157)	(0.179)		(0.157)	(0.179)
GOVPAR		0.002	0.191		0.002	0.191		0.002	0.191
		(0.183)	(0.192)		(0.183)	(0.192)		(0.183)	(0.192)
CEOEDU		0.086	0.084		0.086	0.084		0.086	0.084
		(0.096)	(0.102)		(0.096)	(0.102)		(0.096)	(0.102)
EMPEDU		0.219***	0.202***		0.219***	0.202***		0.219***	0.202***
		(0.031)	(0.033)		(0.031)	(0.033)		(0.031)	(0.033)
Country control	No	No	Yes	No	No	Yes	No	No	Yes
Year control	No	No	Yes	No	No	Yes	No	No	Yes
Industry control	No	No	Yes	No	No	Yes	No	No	Yes
Constant	6.555***	5.420***	5.563***	6.555***	5.420***	5.563***	6.555***	5.420***	5.563***
Constant	(0.078)	(0.200)	(0.587)	(0.078)	(0.200)	(0.587)	(0.078)	(0.200)	(0.587)
Observations	700	700	700	700	700	700	700	700	700
R ²	0.007	0.098	0.172	0.007	0.098	0.172	0.007	0.098	0.172

Variables	EXPORT
Variables	Model 3.1	Model 3.2	Model 3.3	Model 3.4
PATINT	0.021***	0.011***	0.011***	0.009***
	(0.003)	(0.001)	(0.001)	(0.001)
FIRMSIZE		-2.51e-06	-4.29e-06	-9.44e-06**
		(4.35e-06)	(4.85e-06)	(4.57e-06)
FIRMAGE		-0.003	-0.036***	-0.039***
		(0.003)	(0.005)	(0.005)
FORPAR		1.922***	1.347***	1.269***
		(0.206)	(0.203)	(0.207)
GOVPAR		-0.200	-0.135	-0.096
		(0.208)	(0.195)	(0.174)
CEOEDU		0.286***	0.063	0.078
		(0.109)	(0.114)	(0.108)
EMPEDU		0.285***	0.313***	0.306***
		(0.037)	(0.037)	(0.037)
XDIFIC			-0.300	-0.131
			(0.196)	(0.193)
XYEAR			0.069***	0.065***
			(0.009)	(0.009)
XINTER			0.874***	0.568***
			(0.122)	(0.138)
XPROF			0.885***	0.737***
			(0.176)	(0.182)
Country control	No	No	No	Yes
Year control	No	No	No	Yes
Industry control	No	No	No	Yes
Constant	3.373***	1.079***	-0.897***	1.676**
	(0.104)	(0.225)	(0.288)	(0.678)
Observations	700	700	700	700
R ²	0.070	0.286	0.426	0.520

Variables	EXPORT
Variables	Model 4.1	Model 4.2	Model 4.3	Model 4.4
PATDOM	0.009***	0.004***	0.002**	0.001
	(0.002)	(0.001)	(0.001)	(0.001)
FIRMSIZE		-3.39e-06	-5.32e-06	-1.09e-05**
		(4.14e-06)	(4.65e-06)	(4.44e-06)
FIRMAGE		-0.005*	-0.039***	-0.042***
		(0.003)	(0.005)	(0.005)
FORPAR		1.980***	1.424***	1.380***
		(0.206)	(0.204)	(0.207)
GOVPAR		-0.225	-0.149	-0.0798
		(0.209)	(0.197)	(0.179)
CEOEDU		0.299***	0.0861	0.108
		(0.110)	(0.114)	(0.109)
EMPEDU		0.305***	0.332***	0.317***
		(0.0375)	(0.037)	(0.037)
XDIFIC			-0.234	-0.094
			(0.198)	(0.194)
XYEAR			0.070***	0.068***
			(0.009)	(0.010)
XINTER			0.886***	0.538***
			(0.124)	(0.138)
XPROF			0.813***	0.688***
			(0.179)	(0.182)
Country control	No	No	No	Yes
Year control	No	No	No	Yes
Industry control	No	No	No	Yes
Constant	3.393***	1.027***	-0.978***	1.720**
	-0.108	-0.225	-0.293	-0.681
Observations	700	700	700	700
R ²	0.031	0.275	0.411	0.509

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E-mail: rea@ufsm.br

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[1] AUTHORS

Filipe de Castro Quelhas Institution: Faculdades IBMEC. Rio de Janeiro - RJ, Brazil. Degree in Portuguese Languages, Master in Administration Faculdades IBMEC /RJ. E-mail: jdquelhas@gmail.com ORCID https://orcid.org/0000-0003-3050-2143