INNOVATION AND COMPANY VALUE: EVIDENCE FROM THE BALTIC COUNTRIES

Abstract

Innovation is the basis for competitiveness. At the same time, the primary objective of the manager is stockholder wealth maximization, therefore it is essential to study the relationship between innovation and value. The aim of the study is to evaluate the impact of innovation on company value. The research covered Baltic listed companies for the period of 2005−2011. The study finds that innovative companies have a higher value and they are bigger. Within innovative companies it was observed that higher company value is achieved if their ratio of intangible assets exceeds 1 %. Using correlation and multiple regression analyses it was found that innovation is a significant determinant of company value, whereas size is a weaker factor and growth is the least significant factor. The authors of the paper recommend for companies to invest in innovation process, since it increases company value, especially if the ratio of intangible assets exceeds 1 %.