The impact of innovation on firms' performance: an analysis of the hotel sector in Majorca

Studies of the role of innovation in the survival opportunities of firms and in their financial performance are scarce regarding services, and the hospitality sector in particular. This paper expands the research in this field. First, the determinants of environmental and non-environmental innovations are analysed separately. Common factors are found to have different impacts on innovations of a different nature. Second, the role of varying innovation practices in hotel performance is studied. Non-environmental innovations and only some particular environmental innovations are found to have a positive impact on hotel performance, and to contribute to an understanding of their relative performance, even when controlling for quality or human capital variables. These results highlight the convenience of discriminating among innovation measures to guide hotel policies more efficiently. They also suggest that the environmental regulator may be required to intervene for those innovative measures that do not translate into hotels' self-interest, from a performance point of view.