Corporate Innovation and Equity Value: A Case of Coronavirus Crisis

Description

DOI: https://doi.org/10.5281/zenodo.19563763

Mosie C.C. Molate¹, Collins C. Ngwakwe², and Kgobalale N. Motubatse³ (Department of Finance and Investment, Faculty of Economics and Finance, Tshwane University of Technology, South Africa¹, Faculty of Management and Law, Graduate School of Leadership, University of Limpopo, South Africa², and Department of Auditing, Economics and Finance Faculty, Tshwane University of Technology, South Africa³)

Corporate innovation is one of the significant elements contributing to business performance and maintaining corporate competitive advantage. However, research conducted to examine the effect of innovation on equity value during normal business periods has produced mixed results. Hence, this research considers the contribution of corporate innovation towards equity value throughout the coronavirus crisis, to ascertain if the results during the pandemic period corroborate the results during the normal business period. This study adopted a quantitative technique to test the Dynamic Capabilities Theory. Non-primary data were extracted from the financial reports of selected international businesses ranked by Financial Times as thriving throughout the coronavirus times. The cross-sectional information spanning the years, 2019, 2020, and 2021. Employing ordinary least squares regression method, the findings show that innovation had a significant detrimental influence on the Tobin’s Q during a pandemic. The findings are in line with other scholars who obtained an adverse association between corporate innovation and performance of businesses. The study is one of the first few studies to contributes to the innovation and equity value relationship research by addressing whether the positive impact exists during the coronavirus crisis using data from the best one hundred businesses prospering amid the pandemic. This study’s findings may serve as a roadmap for future studies due to its cross-sectional quantitative approach.