The potential link between corporate innovations and corporate competitiveness: evidence from IT firms in the UK

Abstract

Purpose The purpose of this paper is to provide a thorough empirical investigation of the potential link between corporate innovations and corporate competitiveness in the context of the UK IT industry. Design/methodology/approach This research uses a panel of 216 UK IT firms for the period from 2000 to 2016. The sample data for this study were extracted from the Worldscope, extracted from the Datastream database from Thomson Reuters. For the analysis of the data, the generalised method of moments model is applied. Findings The results of this study provide empirical evidence that there exists a strong, positive link between corporate innovations and corporate competitiveness. Such evidence further reinforces the common view in the current literature of strategic management that because of the nature of their business, firms in the IT industry need to enhance their innovative capacities on a continual basis because of their critical role on these firms’ success and survival. Also, it is found that when the proxies for corporate innovations are lagged by two periods, their impact on corporate competitiveness becomes relatively more significant. However, when they are further lagged, i.e. by three periods, such an impact turns out to be relatively less pronounced. Research limitations/implications The data gathered for this paper was restricted to IT-oriented firms in the UK. Using a secondary database (Datastream), the paper considered the period of 2000-2016. Originality/value The research makes a significant contribution to the current debate on the relationship between information technology, innovation and performance, referred to in the literature as the productivity paradox, by studying the problem in the IT industry. It supports organisations from the sector in their efforts to deal with the dynamic nature of technological innovations and of the context where they operate. Methodologically, the way the study has measured the concepts of innovation and performance and the lessons learned from their analysis has also brought value to the research.