Innovation Strategies, Outcomes and Firm Performance: An Analysis of Firm Behaviour in India's Manufacturing Sector

This paper tries to contribute to the emerging stream of research on innovation in developing economies looking at the impact of different firm level strategies on innovation outcomes and the impact of these innovations on firm performance, using the data obtained from World Bank Enterprises Survey conducted for India (2013-14). Firstly, we analyse the relative role of different innovation strategies on product and process innovations. These strategies include technology creation, technology adoption and absorptive capacity building. Technology creation is measured through in-house R&D efforts and technology adoption indicates disembodied knowledge acquisition and embodied technology transfer. Successful product and process innovations occur through technology creation and a mixed strategy in which technology creation and adoption complement each other. The option of only relying on technology adoption is found to be not effective for process innovations. The second part of the study examines the role of product and process innovation as the driver of firm growth. Firm performance is measured through sales growth and productivity growth. We find that product innovations and particularly the combination of product and process innovation significantly improve firm performance. Both innovation and growth performance are supported by availability of finance and managerial skills.