5 Conclusions and discussion
In recent decades, numerous studies have considered the relationship between innovation activities and firm growth, with a focus on estimating the effect of innovation activities on firm sales growth. However, in contrast to most previous studies, this study focused on the role of the stable innovation activities of SMEs in sustainable growth. In line with this, we used firm value, in addition to sales, as a proxy for firm growth, as stock markets have been shown to be a useful channel to decrease firms’ financial obligations (see Brown et al. 2009; Blass and Yosha 2003). Our empirical study simultaneously considered two routes: (1) innovation activities at T1, sales growth at T2, and R&D investment growth at T3; and (2) innovation activities at T1, firm value growth at T2, and R&D investment growth at T3. Moreover, we analyzed the mediation effect of firm growth in the relationship between innovation activities and R&D investment growth through the two routes to examine the R&D financing channel of SMEs. This study adopted a dynamic and evolutionary approach—augmented Gibrat’s law equations—using multiple measures and methods to provide a comprehensive understanding of the firm growth process and to highlight the way in which stock markets can be a potentially important channel to connect SME innovation activities and growth.
