Analysis of Dependence in Ukrainian Enterprises’ Economic Indicators from Measure of their Innovation Activism

Abstract

ABSTRACT. The paper presents the results of an empirical analysis of differences between the economic activity indicators of enterprises with unequal innovative activity. On the basis of a sample survey of Ukrainian enterprises we attempted to verify the theoretical thesis about the relatively higher profitability of the more innovative companies. Revealed that the average of profitability and return on investment for a group of the most innovative companies are lower than for firms with less innovation activity. We have proposed the thesis of the laws of innovative activity reduction in the Ukrainian economy, as long as the main factor of business profitability is not innovation activity, but other reasons.JEL Classification D22Keywords: innovation, differentiation of profitability, human capital, incentives to invest, distribution of the benefits from innovation.(ProQuest: ... denotes formulae omitted.)Introduction and review of literatureInnovative activity of enterprises to a large extent determines the economic preconditions for the economic progress of the society. The processes of globalization, the growth of information saturation of production creates for any economic system the new opportunities and opens up access to overcoming the limited availability of natural resources and accumulated capital. But these processes place high demands on the ability of the national business environment to transform new knowledge and technical capabilities to the growth of industrial and social efficiency. Many scholars have noted that innovations become not a prerequisite for improving individual performance level of production over the socially necessary (most often use the term average), but prerequisite compliance industry standards of efficiency and maintain competitiveness (see for example Stewart, 2007 or Sveiby, 1997).Traditionally, the understanding of the economic mechanism of innovation reproduction suggests that the motivation to make an additional effort and costs related with innovation based on a fairly rigid dependence above the innovative activity - higher profitability. This basic principle of innovation theory suggests that the market rewards successful innovator exceed the reward its colleagues who use traditional methods. In addition, it is an additional fee for the majority of successful innovators enough to justify the effort and expense, and thus create incentives for the continuation and spread of innovation. These provisions are the cornerstone in the theory of economic development (Schumpeter, 2011, Knight, 2000), and in the theory of reproduction major modern factor of innovation activity - human capital (Becker, 1964, Mincer, 1975).However, the ability of market mechanisms to reliably provide sufficient incentives for high innovation activity of enterprises is far from certain.Karl Polanyi notes that the market under certain social conditions regularly rewards more for abuse of dominant position or cruel exploitation of the labor force than for innovation and investment in human capital development (Polanyi, 1944). Outlined by Karl Polanyi principles were developed in the works of the founders of the theory of human development based on the fact that the functioning solely of market mechanisms are not sufficient for the realization of the human potential of society (HDR, 2010).D. North, indicates that it is difficult to imagine a more devastating mistake, rather than the belief that markets automatically push to increase production efficiency, regardless of the specifics of the National Institutes which regulate the distribution of power and knowledge in the area of economic activity (North, 2010).The many problems that prevent the transformation of innovation activity into an integral component of managing the company were indicated in the works of well-known scientists, who decided the problems of modern economic management (Chesbrough, Vanhaverbeke, West, 2008, Archibald, 2002, Berdashkevich, 2002). …