Quantifying Innovation ROI : A Copula-Based Analysis of Hungarian Enterprises' Financial Performance

Vajai, Balázs and Angyal, Viktória (2025) Quantifying Innovation ROI : A Copula-Based Analysis of Hungarian Enterprises' Financial Performance. KÖZ-GAZDASÁG, 20 (4). pp. 13-29. ISSN 1788-0696

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Abstract

Investing in innovation is crucial for sustained growth and competitiveness in medium and large enterprises, yet quantifying its financial returns is challenging. This research examines the impact of innovation-related spending on the economic performance of Hungarian businesses from 2010 to 2020. It introduces a novel method to analyse how these investments affect Free Cash Flow to the Firm (FCFF) and proposes a unique approach to estimating the return on investment (ROI) for innovation activities. The copula methodology compares traditional assessments and models that reveal complex dependencies among financial variables. By analysing a comprehensive dataset of corporate balance sheets, this paper provides insights and strategies for effective financial management. The results suggest that strategically modelled innovation investments can enhance long-term economic success and offer better predictive capabilities than traditional methods.

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