Essays on the determinants of innovativeness and firm performance of Indian enterprises: the role of financial development, government innovation support and external collaborations
thesisposted on 2022-03-28, 01:19 authored by Srinivas Kolluru
The importance of R&D capabilities and innovativeness is widely acknowledged in innovation economics and industrial organisation literature. The extant literature has examined the importance of these factors independently and/or jointly in determining the economic performance of the economies and firms. During the last decade, the economic reforms in India have given importance to building innovation capabilities of firms to enhance their competitive advantage. With the rise of new imperatives, firms in an emerging economy such as India, are no longer relying only on internal innovation capabilities, but concentrating on external and contextual factors in enhancing their innovativeness and firm performance. This thesis focused on Indian enterprises and studies how the firms in India are responding to this new environment by acknowledging the importance of national innovation systems (NIS) and external collaborations. The focus of this study is on the determinants of firm innovativeness and impact of innovation on firm performance in the context of resource-based view (RBV) and knowledge-based view (KBV) theoretical settings. In this thesis, we propose four standalone, yet interwoven papers about financial market development, government innovation support measures, external collaborations and firm innovation, in answering questions regarding their relationship, determinants of innovativeness and their impact on business performance of firms. All these issues that have been and will remain critical drivers of competitive advantage and economic performance of firms in any developed and/or emerging economies. The first paper deals with the review of empirical literature on innovation performance to show a general picture of research on firm innovativeness during the last 25 years and highlights the opportunities for future research. Paper two proposes the relationship between economy’s financial market development and innovation activities at cross-country level, suggesting a well-functioning financial system is a necessary condition for explaining innovation activities in emerging as well as developed countries. In the third paper, NIS is integrated with RBV to provide a theoretical framework for understanding the determinants of firm’s innovation performance. It proposes government innovation support and external collaborations are equally important and are the key drivers of innovation outcome. Paper four investigates how firm innovativeness aids in enhancing the business performance based on the KBV theoretical approach. Although the importance of innovation has been widely recognised in determining firm performance, there is little empirical evidence to explain how the external knowledge sources mediate the relationship between innovation and performance, especially in an emerging economy such as India. The analysis reveals the positive relationship between firm’s internal R&D capabilities, innovation, and performance. Moreover, it explains the partially mediated role of external knowledge in the innovation-performance nexus. The empirical base for this research is provided by the data collected from Center for Monitoring Indian Economy’s Prowess database, Capitaline, firm’s annual reports, World Bank’s World Development Indicators, World Intellectual Property Organisation, World Bank’s Financial Development and Financial Structure Dataset, and World Bank Governance Indicators. Overall, through these three essays, we attempt to demonstrate the importance of NIS, external knowledge sources, and innovativeness to provide a fresh perspective in examining the determinants and outcomes in the case of an emerging economy.