Does Innovation Drive Firm Performance? Evidence from Emerging Markets

Authors

DOI:

https://doi.org/10.17010/ijf/2026/v20i6/175466

Keywords:

innovation, R&D, generalized method of moments (GMM), dynamic panel, firm performance, emerging markets.
JEL Classification Codes :C23, G30, G31, L25, O32
Publication Chronology: Paper Submission Date : August 27, 2025 ; Paper sent back for Revision : May 16, 2026 ; Paper Acceptance Date : May 25, 2026 ; Paper Published Online : June 15, 2026.

Abstract

Purpose : The purpose of the study was to investigate the role of Research & Development (R&D) through innovation in enhancing a firm’s performance and value among Indian non-financial firms in India.

Design/Methodology/Approach : The present research employed a quantitative methodology, based on a balanced dataset spanning 2010–2011 to 2023–2024 and comprising 335 companies. Dynamic panel regression models were drawn from the generalized method of moments estimation.

Key Findings : The study results showed that R&D significantly increased market performance but negatively impacted short-run profitability. Moreover, Indian non-financial firms had moderate to high profit persistence.

Practical Implications : In a dynamic business environment, R&D investments help to sustain competitive advantage. As such, managers need to strategically manage such investments in light of long-term growth and sustainability. In addition, policymakers should consider implementing incentives to foster innovation through R&D investments among Indian listed non-financial companies.

Originality/Value : This study contributes by investigating the relationship between innovation and firm performance and the value relevance of R&D investments among non-financial firms in India.

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Published

2026-06-15

How to Cite

Fernandes, L., & Rodrigues e Melo, F. R. (2026). Does Innovation Drive Firm Performance? Evidence from Emerging Markets. Indian Journal of Finance, 20(6), 29–45. https://doi.org/10.17010/ijf/2026/v20i6/175466

Issue

Volume 20, Issue 6, June 2026

Section

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