Innovation and firm characteristics: evidence from India’s company-level data

Abstract

Purpose This paper tries to explain variation in company-level innovation activities based on certain firm-level characteristics in India between 2010 and 2020. Design/methodology/approach Probit and Heckman’s two-step estimation based on panel data consisting of annual consolidated financial statements of 8,529 companies. Findings Firm-level innovation activities were associated with larger company size, lower age, higher access to digital assets and voluntary expenses on environmental sustainability and social responsibility. Research limitations/implications This paper is based on company-level financial statements and hence does not include aspects related to human capital, managerial capacities, participation in the global value chain and collaboration with other industries or academia. Originality/value This paper uses alternative measures of innovation such as promotional expenses and holding of intangible assets by companies in India alongside R&D expenditure, which is largely used in the past literature. The company characteristics also include emerging areas such as digitalisation, and spending on environmental sustainability and social responsibility, in addition to the conventional factors such as firm size, age and exposure to exports.