Assessing the Impact of Marketing and Organizational Innovations on Firm Performance

Research and Development policies, aiming at stimulating national R&D investments in order to reach the ?fatidic? 3% level of GDP, have become ones of the main priorities of European Union countries through the Lisbon strategy. Numerous studies have used R&D expenditures as a measure for firms' innovative capacity. While emphasizing innovation inputs and support instruments, these works did not take into account other innovation strategies such as marketing or organizational innovations undertaken by the firm. The theoretical literature on innovation highlights nevertheless the feedback character of innovation processes where non-technological activities play a crucial role. Therefore, the purpose of this paper is to highlight the effects of non-technological innovation strategies (organizational and marketing innovations) on firms' technological innovation. We test our hypotheses on a sample of 555 firms in Luxembourg which responded to the 4th Community Innovation Survey (CIS). The results strongly highlight the importance of marketing innovations as a innovation activity for both the propensity to innovate and the innovative performance. This is in line with the idea that firms focusing attention on marketing initiatives are likely to have a better ability to increase customer satisfaction in comparison to competitors, to adapt successfully to changing market needs, to discover and exploit business ideas and to access new information and resources for developing new competitive products or processes - which in turn enhance their capacity to innovate. In contrast, results show that organizational innovation that firms introduced enhances only their propensity to innovate, not their innovative performance. Another important result indicates that firms engaging in knowledge management are likely to have a higher ability to innovate. This tends to indicate that knowledge management strategies are associated with more flexibility, adaptability, competitive advantage and better organizational performance as suggested in the theoretical literature. The results also show that cooperation with customers has a positive impact on performance. This is consistent with previous literature arguing that external relations with customers constituting internal organizational competencies are crucial for firms' performance. To sum up, the paper shows that while the role of R&D expenditures (intramural and/or extramural) in enhancing innovative capacity and performance is largely acknowledged, other strategies may also be crucial for firms' competitiveness. The results offer some clues for policy-makers in order to support non-technological innovations within the firm.