Direct and indirect effects of innovation on revenue growth: comparison between the US and Taiwanese electronics firms

Innovation is essential for high-tech/electronic companies to succeed in a globally competitive environment. It is important for a firm to understand the efficiency of an innovation, so that they can appropriately allocate the resources to obtain optimal revenues. This study utilises the neoclassical production function of economics theory to model the revenue growth of electronics firms with respect to various types of innovation. The model is employed to analyse and compare the direct and indirect effects of innovation between US and Taiwanese electronics firms. Based on the model derived from the neoclassical production function, a non-linear regression model is constructed to identify the contributions of various types of innovation through empirical data from the two countries. The sample sizes of the data from the two countries are 1,900 and 803 for the USA and Taiwan, respectively. Empirical results conclude that the direct innovation effects of US firms are stronger than those of Taiwanese firms, while the indirect effects demonstrate a reverse direction.