Does Innovation Pay Off in Terms of Firm Performance? - Evidence from the European Automotive Industry –

ABSTRACT   Given a more intense competition and substantial investments in research and development (R&D), this paper investigates the impact of innovation on performance in the European automotive industry. More specifically, using secondary data for 98 observations and running multiple regression models, this study examines the effect of the number of both total and green patent applications, and R&D intensity on return on assets (ROA). The evidence suggests that both patent applications and R&D intensity have a positive and significant impact on ROA, whereas green patents are marginally insignificant at the 10% significance level. The results have important implications for business leaders in the industry indicating that innovation does indeed improve performance.