Does innovation drive profitable growth? New metrics for a complete picture

Abstract

Purpose

Organizations intent on driving profitable growth recognize they need innovation, but most measures of innovation are incomplete, focusing only on R&D or new product development. This paper suggests an alternative, enterprise‐level measure that reflects the broadest definition of innovation and focuses on impact or value.

Design/methodology/approach

It uses publicly‐available financial data for companies in a variety of industries to create a profitable growth scale, ranking companies relative to their peers. It independently rates companies based on a survey of executives about company innovativeness.

Findings

The ranking based on financial data corresponds well to executives' self‐report information about how innovative their organizations are.

Originality/value

Since these two independent rankings of innovativeness align, I argue that executives can use the publicly available profitable growth scale to assess their own innovation performance relative to others in their industry.

Citation

Linder, J.C. (2006), "Does innovation drive profitable growth? New metrics for a complete picture", Journal of Business Strategy, Vol. 27 No. 5, pp. 38-44. https://doi.org/10.1108/02756660610692699