Unravelling the relationship between absorptive capacity, innovation, and financial performance: A longitudinal study
This study explores the intricate relationships among absorptive capacity, innovation, and financial performance in nonfinancial firms. Using data from COMPUSTAT spanning 1966 to 2020, including 25,392 observations, Tobin's Q is used as a measure of financial performance. Absorptive capacity, m...
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| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
| Published: |
KeAi Communications Co., Ltd.
2025-06-01
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| Series: | International Journal of Innovation Studies |
| Subjects: | |
| Online Access: | http://www.sciencedirect.com/science/article/pii/S2096248725000013 |
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| Summary: | This study explores the intricate relationships among absorptive capacity, innovation, and financial performance in nonfinancial firms. Using data from COMPUSTAT spanning 1966 to 2020, including 25,392 observations, Tobin's Q is used as a measure of financial performance. Absorptive capacity, measured by the ratio of research and development expenses to total revenue, has a significant positive direct impact on both innovation and financial performance. However, innovation, represented by the natural logarithm of total intangible assets, has a negative influence on financial performance and mediates the positive relationship between absorptive capacity and financial performance. This reveals the suppressive role of innovation in the absorptive capacity-financial performance relationship. This challenges the conventional belief that innovation invariably leads to improved financial outcomes, highlighting the nuanced dynamics involved. The study underscores the trade-offs between short-term gains and long-term potential, emphasizing the complexity of organizational success in today's competitive landscape. |
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| ISSN: | 2096-2487 |