Innovation investment and economic performance in transition economies: Evidence from Slovenia

Abstract This research investigates the relationship between innovation expenditure and its economic performance in 2503 companies. The findings show higher innovation expenditure productivity in the group of Leaders; each euro invested in innovation yields EUR 13.90, but just EUR 7.70 in the group of Followers. ROE is 40% higher in Leaders. Recommendations are provided as to the improvement of business processes and results: financial investments in innovation should be increased in Followers, while simultaneously a substantial improvement in the efficiency of exploiting existing assets is essential. Companies should increase their expenditure on extramural R&D, acquisition of external knowledge (concept of open innovation model) and market introduction of innovations. Further on, we compared some financial data on Slovenian companies with EU average data. The results clearly indicate that Slovenian innovation expenditures are relatively high but not being applied optimally to achieve economic results that compare to the EU average.