The effect of a firm's strategic innovation decisions on its market performance

Abstract

Until recently, different types of innovation strategy have been introduced in innovation studies. However, their effects on firms' market performance have been underexplored. To overcome this limitation, we empirically examined the effect of different innovation strategies on firms' market performance using the panel data for 2496 firms obtained from Korea Innovation Survey (2010). In doing so, we categorise firms depending on whether their products are new to the firm or to the market and whether they are incremental and radical, giving us a 2x2 matrix of innovation strategy. We found that, in high-tech industries, an innovation strategy of 'new product targeting existing markets' and 'improved product targeting new markets' was less effective for increasing sales growth than 'improved product targeting existing markets'. However, in the case of medium-high tech industries, an innovation strategy of 'new products targeting existing markets' was the most effective strategy.