IMPACT OF BUSINESS SIZE ON INNOVATION PROCESS AND PRODUCTIVITY IN GEORGIA
In contemporary times, there is a widespread and continuous technological transformation driven by the scientific-technical revolution, affecting all countries. Consequently, the focus of a nation's development has shifted from a static, short-term, and resource-based business approach to more innovative, dynamic, and creative models. For Georgian companies seeking to establish themselves as competitive entities in the global business landscape, it is crucial to conduct a comprehensive analysis of technological environmental factors and integrate them into their international business strategies. One critical aspect in this direction is the empirical examination of the relationship between innovation processes and productivity at the micro-level. To achieve this, the study employs microdata provided by the World Bank and employs structural model known as the CDM model. This approach allows for an analysis of the impact of product/service and process innovations on the productivity of Georgian companies, considering their specific scale and size. The research proceeds in several stages. Firstly, it investigates the factors influencing research and development, followed by an analysis of the determinants of product/service and process innovation. Finally, the study identifies the overall impact of innovation on productivity. Notably, the results highlight significant causal connections between innovation and productivity concerning the size of the company. Surprisingly, the empirical research conducted on Georgian firms revealed unexpected outcomes. Specifically, it was found that research and development (R&D) exerted a statistically significant negative influence on innovation processes. Furthermore, the contribution of innovation to labor productivity was not statistically significant. However, on a positive note, the study demonstrated that investments in fixed capital and the number of employees had a favorable impact on labor productivity. In conclusion, the ongoing technological advancements driven by the scientific-technical revolution have led countries to shift their developmental focus towards innovation-oriented and dynamic business models. For Georgian companies aiming to thrive in the global business arena, it is essential to consider the relationship between innovation and productivity at the micro level. The study conducted using the CDM model and microdata from the World Bank revealed interesting insights, indicating the need for further investigation and exploration of these findings.
Innovation, Productivity, Firm Size, Research and Development