Capacity to Innovate as Driver for Innovation Enhanced Growth

The ability of companies to respond rapidly to business and environmental changes is crucially important for their development and sustainable growth. In this study, a time-series analysis is used to investigate the relationship between a firm’s Capacity to Innovate (CTI) and the Innovation Enhanced Growth (IEG) it experiences. The raw data was gathered from several firms independently using one unified assessment tool over a period of five years. This data is then analyzed using inferential statistics through one-way Analysis of Variance (ANOVA) to evaluate and compare the average scores associated with the CTI and IEG variables. Furthermore, the post hoc analysis is applied to assess the extent and direction of variation in scores of the selected variables, and moderated across different years. The results indicate that there is a positive correlation between CTI and IEG for Small to Medium Enterprises (SME), and that both the CTI and IEG vary over time. More specifically, their individual behavior and their interdependent relationships, at least partially, are seen to be influenced by both macroeconomic dynamics and globalization. These relationships are discussed and analyzed in the context of local market growth and suitability. The research aims to assist SME stakeholders and governing bodies, in recognizing the changes in the macroeconomic scales on the economic throughput from innovation, growth, and sustainability perspectives.