The impact of management quality on firms' innovation and productivity in Russia

Abstract

Innovations are among the most important drivers of firms' productivity improvement. Newly introduced products and processes, as well as organizational and marketing practices, are important for firms' performance and for countries' prosperity. In this paper, we analyze how management processes influence firms' innovation and performance based on Russian data. Our main research question is how the quality of management affects innovative results and thereby, productivity. We employ a survey of enterprise activities, and business climate BEEPS covering the period 2012-2014 and including 1564 firms. Based on the existing literature, we create a framework to study the impact of various factors on firms' innovation and productivity. We study both internal factors such as a firm's quality of management and external factors such as innovation climate in the region and availability of private and public financing. A model applied in our research is a well-known CDM model containing three stages. This model makes it possible to analyze expenditures for research and development, implementation of innovations, and then its impact on the firm's performance. Estimation results demonstrate that enterprises benefit from innovations. The same time, our research shows the importance of management quality in the firms' innovative activities among the other internal and external factors affecting innovations. Results can be applied by the enterprises interested in innovations and by policymakers involved in facilitating innovations at the regional and country level. Implications for Central European audience: A version of a well developed CDM model is used, which makes results reliable; the model can be further applied for the analysis of various economies, including the countries of Central Europe. Our research sheds light on the determinants of innovation activity at all its stages, creating a background for analysis and development of economic policy. A key implication is that management quality deserves attention along with other factors affecting firms' innovation and productivity. The research is based on firm-level BEEPS data for Russia, making the possible comparison with the other countries covered by BEEPS survey. © 2020, Economics - Prague, Faculty of Business Administration.