Which innovation type is better for production efficiency?
A comparison between product/service, process, organizational, and marketing innovations using stochastic frontier and meta-frontier analysis
Abstract
Innovation has been recognised as essential in a firm’s success, but not all firms can actively engage in innovation activities due to their limited resources and the potential risks involved in such activities. In such a situation, a better understanding of the difference in the effects of the different innovation types is needed. However, little is known about the differences in technical efficiency in terms of innovation types. This study compared technical efficiency across different firms that applied different production function technologies differentiated by innovation type. Data from the seventh version of the Workplace Panel Survey of the Korean Labor Institute was used. Manufacturing firms that adopted a single innovation type were included in the final sample, based on the results of an exploratory data analysis. Using stochastic frontier analysis, the efficiencies of the four groups were estimated, and the efficiencies of different production function technologies were compared using meta-frontier analysis. The estimation results indicate that the organisation innovation group showed better efficiency than other groups, while the product/service innovation group exhibited the highest potential in its production technology.