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The Role of Innovation in Organizational Productivity

Companies have always been looking for ways to boost productivity to improve their financial performance. A well-done strategy on innovation can help make your company more profitable and get the workforce on your side. The truth is that companies that focus on innovation and increasing productivity have a much higher chance of staying in business.

There are a lot of unanswered questions about innovation, and one is how we measure it. Innovation is pretty hard to quantify in the first place, but from what we can tell it seems like innovation affects economic performance. The more relevant data we have at the company level, the better we can judge whether productivity is linked to performance and whether there are any benefits from implementing new ideas.

Therefore, in this write-up, we would open up the discussion on the role of innovation in business productivity. The relationship between innovation and productivity has been extensively explored in the literature. Griliches (1979; 1986) is among the first to study this relationship, showing that more innovative firms have higher levels of productivity.

There is still a debate as to whether innovation and productivity are linked or not, especially when it comes to SMEs. First, we explore the role of age and size. Young firms are defined as those in the most recent quartile (up to nine years old), while for our purposes, firms are defined as micro, small, or medium based on size. We see the average age of firms is highest among medium-sized firms and lowest among contemporaries.

We believe that technology plays a crucial role in increasing productivity. To get more data, we need to continue investing in technological innovation and advancements at all levels of society. We offer a new and innovative perspective on innovation in firms by scraping web sources in addition to traditional patents & surveys.

The following quote is from the paper “Where Do Innovations Come From? The Importance of
Quirky Ideas”.

“In our view, a key to innovation is not just to come up with expensive, time-consuming, and
risky solutions, but also to explore cheaper, quicker, and easier solutions to find out whether they
work”.

The authors of this paper believe that it is valuable for businesses to explore cheaper ways of
solving problems to increase productivity in today’s business world.

This is an open discussion, we would like to have your experience and thinking on this topic.

Remi Dairo
CEO, Productivate Plus, USA. (Connect on LinkedIn: Remi Dairo)

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