Product innovation processes and the trade-off between product innovation performance and business performance

This paper is concerned with the management and organization of product innovation processes, and how innovation performance relates to business performance. The underlying rationale is that encouraging firms to innovate will lead to a better business performance.

This study leverages a data set of 99 medium-sized technology firms in Sweden. The first part of the analysis in this study aims at finding determinants of product innovation processes, and the second part is the analysis and trade-off between innovation performance and business performance. First, a research framework is developed in which the link between strategic dimensions, process dimensions and organizational dimensions of product innovation activity and product innovation performance is tested. Second, the research framework tests the relationship between innovation performance and business performance (sales and profitability).

Product innovation performance (patent) is affected by seven variables of the 14 variables that represent product innovation processes. Product innovation performance is not affected by firm size, firm age, branch and product life cycles and, in the regression model, all three innovation performance variables (patents, copyrights and licenses) have a positive effect on the firm's sales, but there were no connections to the firm's profitability.

The main implication of the study is the idea supporting a multi-aspects approach to the product innovation processes and performance since product innovation process dimensions (variables used in the study) have only partial influence on innovation-/business performance.