Wednesday, 29 July 2015

Does innovation increase sales growth in DRC companies?

One way companies can increase their sales is through innovation.  The increase can come if companies improve their products while keeping the same price.  On the other hand, a company may innovate but fail to bring their product to market successfully, and rivals may capture the benefits.  In the Democratic Republic of Congo, does innovation increase sales growth?

Table 1 shows the average growth rate of sales for DRC companies, split by whether they introduced a product new to the company (data from  Both the average sales rate and new product introduction are over the period 2010-2012 inclusive, and only apply to companies that survived during the period.

Table 1: average growth rate of sales for DRC companies, split by new product introduction
No new products: 11.5%
New products: 34.1%

Companies that introduced new products grew much more quickly than those that didn't.  However, it might be that fast growing companies had more money and so could innovate, rather than innovation leading to faster growth.  Table 2 looks at companies that were using high speed broadband internet to research new products and services in 2010.

Table 2: average growth rate of sales for DRC companies, split by use of the internet for new product research in 2010
No internet research: 19.8%
Internet research: 29.5%

Companies that were doing internet research for new products and services in 2010 did better in the next few years.  The rate of growth over 2010-2012 is less likely to influence what happened in 2010, so there is clearer evidence for innovation leading to growth.

It might be argued that internet use brings other advantages unrelated to innovation (like the ability to make long-distance sales), and these other advantages may account for sales growth.  Table 3 looks at the performance of companies with the internet, and split by whether they did research with it or not:

Table 3: average growth rate of sales for DRC companies who had the internet in 2010, split by its use for new product research
Internet access and no internet research: 4.0%
Internet access and internet research: 29.5%

If a company had the internet but didn't use it for research, they had much lower sales growth.  Innovation seems to have been an important part of sales growth in the DRC over 2010-2012.

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