This research aims to understand how innovation affects and is affected by a firm’s financial performance. It focuses particularly on the Internet industry and collects both quantitative and qualitative data from online-based SMEs in Germany. The results reveal that among online-businesses, the size of the company in terms of revenue is positively related to the level of innovation, whereas lower profitability and smaller absolute earnings seem to encourage higher levels of innovation. Companies with higher revenues are found to earn generally lower profit margins. It was also found that companies that experienced a reduction in annual revenue have a tendency to increase innovation levels. No significant effects were found between innovation levels and change in profitability. Similarly, no significant effects were found between change in profitability and growth. Among online-based SMEs, this study highlights the importance of innovation as an instrument employed by distressed companies to improve their performance. It also shows that there may be a tendency for the companies that are more profitable to focus less on innovation.
Table of Contents
1. Introduction
1.1 Research Problem
1.2 Research Questions and Objectives
1.3 Outline of the Thesis
2. Background
2.1 The Internet as a Platform for Business
The Impacts on SMEs
Rough History and some Drawbacks
The Future: The Internet of Things
Online-Based Business and Revenue Models
2.2 Internet Business in Germany
The Online-based Company
Current Situation in Germany
SMEs in Germany
2.3 Definitions & Dimensions of Innovation in Online-based Businesses
What is Innovation?
Drivers of Innovation
The Innovation Process
Innovation Management for Success
Innovation Types and Classifications
3. Literature Review & Hypotheses Development
3.1 Literature on Innovation-Size & Innovation-Profitability Relationships
3.2 Literature on Size-Profitability Relationship
3.3 Literature on Innovation-Growth & Innovation-Profitability Improvement Relationship
3.4 Literature on Growth - Change in Profitability Relationship
3.5 An Overview of Past Literature
4. Analytical Framework & Conceptual Model
4.1 Measurement Model
Innovation
Growth
Profitability
5. Methodology
5.1 Mixed-methods Research
5.2 Quantitative Research through Online Survey
Subjects and Participants
Materials and Tools
Design
Procedure
5.3 Qualitative Research
Participants
Materials
Design
Procedure
6. Findings
6.1 Survey Data
Graphical Representation of Collected Data
6.2 Summary of Regression Analysis
Power and Sample Size Analysis
6.3 Interview Findings
Expert Interviews
Short Interviews
7. Analysis and Discussion
7.1 Theoretical Conclusions
H1: Innovation-Size
H2.1: Innovation-Profitability
H2.2 Innovation-Earnings
H3: Profitability-Size
H4: Growth-Innovation
H5: Change in Profitability-Innovation
H6: Growth-Change in Profitability
7.2 Limitations
7.3 Recommendations for Further Study
8. Conclusion
9. Notes
Research Objectives and Focus
This thesis aims to explore the inter-relationship between innovation, growth, and profitability within the context of German online-based SMEs. The primary research objective is to determine how firm size and innovation levels correlate with financial performance, addressing whether innovation acts as a catalyst for growth or if it is influenced by financial stability.
- Analysis of innovation's impact on long-term firm performance.
- Evaluation of firm size, revenue, and profitability as determinants of innovation.
- Investigation of the relationship between corporate growth and innovation levels.
- Empirical study using mixed-methods research (quantitative online surveys and qualitative expert interviews).
- Examination of the unique challenges faced by online-based SMEs in Germany regarding innovation and profitability.
Excerpt from the Thesis
1.1 Research Problem
In a 2013 ranking of the largest Internet companies worldwide by market capitalization, it is remarkable that in an era where industries and markets are progressively migrating online, only one of the companies, United Internet is birthed in Germany. Germany, the largest national economy in Europe, the 4th largest world economy by nominal GDP, and 3rd largest exporter in the world, seems to be falling behind not only in the domain of online-based businesses but also in its innovation ranking, being placed a mere 13th in the Global Innovation Index, behind other countries far less significant in economic power.
Even then, from a temporal perspective, United Internet is old compared to the average Internet company, having been founded in 1988 in Montabaur in Germany. Focusing on the younger generation of companies in the sector by analyzing the digital startups industry, it is again a disconcerting fact that only one Germany-based company, Zalando, takes a spot, albeit at the lower end of the ranking, in the list of the top ten most valuable startups in 2014. In another evaluation by some of the most active investors in the sector, out of the twenty-five fastest growing Internet companies in Europe that are nominated, only two are German-based, one of which is again Zalando (Informilo, 2013).
The question of whether Germany’s current low innovation rating have anything to do with its inability to produce more successful online-based businesses to rival its true peers such as the USA and China, can be only be answered by analyzing in depth the role of innovation in the development of an Internet company in current times. Only then, can one understand the forces behind the relatively low-performing albeit growing digital industry in Germany.
Summary of Chapters
1. Introduction: Outlines the research problem, objectives, and the scope of the study regarding German internet-based SMEs.
2. Background: Provides context on the importance of the Internet for business models, the specific situation in Germany, and fundamental definitions of innovation.
3. Literature Review & Hypotheses Development: Reviews existing theories and academic literature to formulate specific research hypotheses.
4. Analytical Framework & Conceptual Model: Presents the conceptual models and defines the variables used to measure innovation, growth, and profitability.
5. Methodology: Details the mixed-methods research design, including quantitative survey procedures and qualitative interview protocols.
6. Findings: Reports the raw data, graphical representations, and statistical results from the regression analysis.
7. Analysis and Discussion: Interprets the empirical findings in relation to the initial hypotheses and discusses the limitations of the study.
8. Conclusion: Summarizes the key insights and offers recommendations for future research.
Keywords
Innovation, size, profitability, growth, performance, SME, Mittelstand, Internet business, online-based business, e-commerce, e-business
Frequently Asked Questions
What is the core focus of this thesis?
The research focuses on understanding the inter-relationship between innovation, firm growth, and profitability specifically within German online-based SMEs.
What are the central thematic fields?
The study investigates innovation management, firm performance, business models for online companies, and the dynamics of digital startups in Germany.
What is the primary research question?
The thesis seeks to identify whether firm size and innovation levels are interrelated and how these factors contribute to the long-term financial performance of online companies.
Which methodology is employed?
The author uses a mixed-methods approach, combining a quantitative online survey of German SMEs with qualitative semi-structured expert interviews.
What does the main body of the work cover?
The main body covers a comprehensive literature review, the development of a conceptual framework, the research methodology, data findings, and an in-depth analysis of hypotheses.
Which keywords define this work?
The key terms include innovation, profitability, growth, firm performance, and the German Mittelstand (SMEs) operating in the digital economy.
How does the author define innovation in this study?
Innovation is defined as the sum of new product/service offerings and the implementation of operational/process improvements within the firm.
What were the major findings regarding profitability and innovation?
The study found that companies with higher revenues tend to be more innovative, while surprisingly, lower profitability seems to act as a catalyst for innovation in some cases.
- Citar trabajo
- Yi Ling Wong (Autor), 2014, The Inter-Relationship between Innovation, Growth & Profitability of Germany's Online-Based SMEs, Múnich, GRIN Verlag, https://www.grin.com/document/284157
