The Innovation Nexus: Is Environmental Patent Introduction Influenced by Revenue Growth, Profitability, R&D and Investment Intensity?
Abstract
Due to the recent upward trend in environmental sustainability initiatives, many corporations have capitalized on the benefits of appealing to the eco-conscious consumer market by offering them innovative products and services. Patent introduction, used as a proxy for environmental innovation, is a key dimension of measuring how well those corporations are doing to meet both consumer expectations and industry regulations. While some corporations have been more successful in patenting activity than others, there has been little research done on what drives patent introduction from a financial standpoint. Using R&D intensity as a percentage of revenue, net income growth, year-over-year revenue growth, and long-term investment intensity as financial measures, this paper examines the relationship between financial strength and innovation as an organizational outcome. Analysis will be conducted using regression in a STATA xta bond model, using dummy year variables to control for time-fixed effects. Furthermore, by using a firm-industry ratio of patent growth year-over-year, a better analysis can be performed controlling for industry variations. Bridging the gap between quantitative measures and innovation output will better position corporations to execute patenting activity relative to the monetary resources they possess.
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