Innovation, Firm Efficiency and Firm Value: Firm-level Evidence in Japanese Electricity Machinery Industry

This paper begins with measuring Japanese electrical machinery industry's technical efficiency of profitability basing on DEA and SFA approaches. Our result shows that low-level profitability efficiency exists in Japanese electrical machinery industry since 2000. Then four panel data regressions are estimated for testing the links among innovation capacity, firm profitability efficiency, and corporate market-value performance, controlled by other factors. Our estimations show that firm's R&D expenditure can positively and significantly affect firm Tobin's Q ratio in long-term, but this relationship is not clear in short-term. Finally, our estimations verify that a tight, positive and significant linkage between firm efficiency and firm value with controlling firm size, financial leverage, turnover of stock trading, structure of shareholder and other variables basing on fixed-effect and random-effect model.