Abstract:

The ability to innovate is generally assumed as a critical success factor for growth and future performance of companies. Drawing on data from both the EU Industrial R&D Investment Scoreboard and PATSTAT, the purpose of this study is to provide evidence of the impact of the investment in R&D on companies’ innovative and financial performances. A three-stage model is tested with R&D effort influencing innovation performances, which, in turn, affect financial performances. Regression analysis confirmed the proposed model. The work offers clear implications for managers who should put additional emphasis on innovation, as it is an important element for achieving improved overall firm performance and sustainable competitive power.