Does innovation efficiency affect financial performance? The role of ownership concentration

Abstract

The company that is synonymous with the application of science and technology is the manufacturing industry (Krmela et al., 2022). Manufacturing companies in Indonesia have been accustomed to the use of technology in their production activities so far, because technology really helps the company’s production to be more effective (Muchran, 2020). This study examines the effect of innovation efficiency on firm performance and the moderating role of ownership concentration on this effect. This study examines innovation efficiency as the optimal combination of innovation input and innovation output. The inputs used are research and development expenses, machine repair expenses, and information technology purchases. Meanwhile, the output of innovation. This study used 616 annual reports of manufacturing companies from 2013 to 2018. The analytical technique used is a moderated regression analysis. The results show that efficiency is positively and significantly correlated with company performance. In addition, the results of the study provide evidence of concentrated ownership, encouraging managers to be more intensive in carrying out innovation efficiency so that it affects increasing company performance. These findings show that there is efficiency in innovation projects that can improve company performance, and companies with concentrated ownership find it easier to carry out innovation efficiency because of the active involvement of shareholders in the management process when innovation projects are implemented aimed at improving company performance.