Exploring Links Between Innovation and Profitability in Georgia Manufacturers

Encouraging innovation in manufacturing is of much interest in business and policy circles. One aspect of this emphasis on innovation is the assumption that innovation leads to tangible business outcomes that can sustain the competitiveness of industries and create jobs. This study examines the relationship between product and process innovation and profitability and employment growth using a unique set of cross-sectional data from the Georgia Manufacturing Survey over three time periods of 2005, 2010, and 2016. The results failed to show a connection between innovation and firm performance in the 2010 and 2016 periods. One implication from the 2010 and 2016 results is that standard product and process improvements may not be enough to achieve benefits in 2010 and 2016, because manufacturers may be having difficulty appropriating profits from these innovation practices in today’s globally competitive climate. The results suggest a need for more nuanced measurement of innovation in associating it with business outcomes