Core determinants of companies innovation performance: case for Armenia

The paper discusses scientific arguments and counterarguments about companies’ innovative activity, size, and geographic location of the sales market. The study’s foremost purpose is to empirically check if theoretical statements about a company’s size, export, and innovative activity are associated. Therefore, the questions discussed in this paper are a) Does an enterprise-size matter an enterprise innovation activity? b) Is there is a difference in innovation activity by Classification of Economic Activities (NACE groups)? c) Does the geographic location of the sales market matter the company's innovation activity? The research questions are discussed based on Armenian firm-level data. The findings could be applied mainly to the microeconomic environment of Armenia. The study involved R programming language Wilcoxon test, ANOVA, Tukey test, and Chi-square test are applied. The obtained results showed that the enterprise’s size does not matter an enterprise’s innovative activity. Even though larger companies have more resources to innovate, smaller companies are more flexible and agile. Therefore, the enterprise size is not a limiting factor. The results showed that the companies in some fields of the economy are more prone to innovate than others. In Armenia, most innovative enterprises operate in the group M-Professional, scientific and technical activities and the group C-Manufacturing. The research empirically confirms that when considering a company’s innovative activity, the sphere of the economy in which it operates has statistically significant importance in contrast with the company’s size. The findings by the Chi-Square test showed that a significantly higher number of EU exporting companies had made innovations. In contrast, companies selling their products/services in the local market have made significantly fewer innovations than expected if there would be no association between innovations and the geographic location of the sales market. Therefore, the exporting companies are more innovative than those that sell their products in the local market. Besides, the most innovative firms are EU exporting enterprises. In empiric studies, export is used as a proxy of international competitiveness due to its ability to show a country’s capacity in producing and selling in the international market. Therefore, the analysis of Armenian firm-level data showed the association between innovation and international competitiveness.