Influence of product innovations on financial performance of small and medium-sized enterprises in the Czech Republic

Abstract

Objective of this article is to determine possible effect of product innovations on the financial performance of small and medium-sized enterprises in the Czech Republic. The pilot research has been realized on the statistical sample of 100 companies which were categorized into three basic groups; service companies, trade companies, and production companies. As the measure of innovation effect, the authors applied the deviation of production power, i.e. the ration of EBIT to assets, of a business entity from the industry average while the industry average of production power was selected especially in order to reduce the infl uence of the economy cycles. In the three categories of companies, different effects of product innovations have been observed. In the service companies and trade companies, the positive effect is limited because of potential simplicity of imitation by competitors. More positive effect of product innovations has been observed in production companies which can protect the products or production processes better then service companies or trade companies where the product innovations are mostly connected with extension of extension of services portfolio offered. For the conclusion, the authors provide suppositions and designs for their future research in this problem of innovations' effectiveness measurement.