The Interlinkages Between Innovation, ESG Scores, and Financial Performance in the Nordic Manufacturing Sector
Batjargal, Azjargal (2025)
2025
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Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2025121134967
https://urn.fi/URN:NBN:fi:amk-2025121134967
Tiivistelmä
Abstract
Nowadays, innovation and ESG practices are regarded as leading drivers of competitiveness, profitability, and growth in corporate environment, particularly in manufacturing sector. This study analyzed how innovation and ESG scores affects the financial performance in the Nordic manufacturing sector utilizing 256 firm-year observations for the eight-year period between 2017 to 2024. The study utilized two innovation variables, R&D intensity (RDI) and intangible ratio (INTAN), overall ESG overall score (ESG overall), and its component pillar scores (E, S, and G pillar) and two financial indicator variables, returns on investments (ROA) and market-based Tobin’s Q metric, and two control variables, firm size (Size), financial leverage (D/E) to conduct descriptive, correlation, and regression analyses. The descriptive statistics findings revealed considerable variation in ROA, Q, RDI, and firm size, while the overall ESG score remained persistently modest dispersion. The correlation analysis results showed that there is no significant correlation between ESG overall score, ROA, Q; but ESG overall score and its component pillar scores exhibited strong intercorrelations within its pillar scores. Moreover, RDI and INTAN showed moderate negative correlation with ROA and Q. In the regression analysis results illustrated that INTAN significantly reduces ROA and Q. Similarly, D/E persistently shows perfect negative association with ROA. Collectively, ESG practices and innovation activities do not generate financial benefits in short-term across the samples. These findings enriched the current implications of innovation and sustainability practice on financial performance and decision-making in the context of Nordic manufacturing sector.
Nowadays, innovation and ESG practices are regarded as leading drivers of competitiveness, profitability, and growth in corporate environment, particularly in manufacturing sector. This study analyzed how innovation and ESG scores affects the financial performance in the Nordic manufacturing sector utilizing 256 firm-year observations for the eight-year period between 2017 to 2024. The study utilized two innovation variables, R&D intensity (RDI) and intangible ratio (INTAN), overall ESG overall score (ESG overall), and its component pillar scores (E, S, and G pillar) and two financial indicator variables, returns on investments (ROA) and market-based Tobin’s Q metric, and two control variables, firm size (Size), financial leverage (D/E) to conduct descriptive, correlation, and regression analyses. The descriptive statistics findings revealed considerable variation in ROA, Q, RDI, and firm size, while the overall ESG score remained persistently modest dispersion. The correlation analysis results showed that there is no significant correlation between ESG overall score, ROA, Q; but ESG overall score and its component pillar scores exhibited strong intercorrelations within its pillar scores. Moreover, RDI and INTAN showed moderate negative correlation with ROA and Q. In the regression analysis results illustrated that INTAN significantly reduces ROA and Q. Similarly, D/E persistently shows perfect negative association with ROA. Collectively, ESG practices and innovation activities do not generate financial benefits in short-term across the samples. These findings enriched the current implications of innovation and sustainability practice on financial performance and decision-making in the context of Nordic manufacturing sector.