The impact of process innovation on business performance

Abstract

The objective of this paper is twofold: 1) investigates the impact of process innovation on business performance in the context of a dependent market economy (DME); 2) look into the industrial specifics of the question. We assume that due to the context, process innovation is an important activity, which leads to higher business performance (measured as EBIT/sales), since the competitive advantage in a DME stems primarily from better (cheaper, faster, higher quality) production. The 2016 Community Innovation Survey and 2014-2018 company profit and loss statements are used from Hungary with 5002 companies. The analyses only partly support the hypotheses. Although in overall innovating companies have better business performance, based on regression analyses company size and industry are more important factors to achieve higher business performance than any kind of innovation activity. Nevertheless, among the types of innovation (product, service, process), still process innovation has the largest impact on business performance.