R&D, Innovation, and Firm Outcomes: Market Value and Performance Evidence from the G7

七国集团研发与创新对企业绩效与市场价值的证据

Abstract

This study provides the first empirical evidence on how innovation and firm growth influence performance across G7 economies, using a unique panel dataset of 252 firms observed from 2020 to 2024. Focusing on two key dimensions of firm performance labor productivity and asset turnover the analysis incorporates multiple innovation indicators, including R&D Intensity, R&D-to-Assets, and R&D Growth Rate. To mitigate potential endogeneity arising from reverse causality and omitted variable bias, the study employs a heteroskedasticity-based instrumental variable estimator that constructs internal instruments from the model’s error structure. The empirical results consistently show that innovation exerts a positive and significant causal effect on labor productivity, reinforcing its role as a critical driver of firm-level efficiency. Conversely, innovation demonstrates a negative and significant relationship with asset turnover, indicating short-term operational efficiency trade-offs, particularly among firms pursuing aggressive R&D strategies. Further analysis reveals that these innovation effects are moderated by firm profitability and industry-specific conditions, underscoring the strategic and contextual determinants of innovation outcomes. Overall, the findings highlight the dual nature of innovation simultaneously enhancing productivity while imposing transitional efficiency costs and provide important implications for corporate innovation strategy and public policy within advanced economies.