Research on World Agricultural Economy

Exploring the Interplay between Innovation Investment and Financial Sustainability in European Agricultural Companies

Nascimento Cunha

Instituto Miguel Torgat, 3000‑132 Coimbra, Portugal; Centro de Investigação de Artes e Comunicação, 22 B 2700‑571 Amadora, Portugal

DOI: https://doi.org/10.36956/rwae.v6i2.1705

Received: 28 January 2025 | Revised: 28 January 2025 | Accepted: 4 March 2025 | Published Online: 21 April 2025

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Abstract

This study explores the bidirectional relationship between innovation investment and financial sustainability in agriculture, examining whether one influences the other while accounting for additional variables. Grounded in the United Nations’ Sustainable Development Goals (SDGs) and corporate social responsibility (CSR) theories, it draws from literature on innovation’s impact on performance and sustainable finance. A quantitative method is used, employing panel data from 72 companies over 12 years (612 observations), analyzed through multiple linear regression with fixed‑effects estimation. Financial sustainability positively affects innovation investment after one‑ and two‑year lags, reflecting delayed evaluations by investors and financiers. Conversely, innovation impacts financial sustainability negatively in the short term but positively after two years, emphasizing long‑term gains. GDP significantly influences both variables, while agricultural service specialization does not. Profitability indicators (ROA and ROE) explain financial sustainability but not innovation investment. The findings underscore the importance of time in assessing innovation outcomes and highlight the role of macroeconomic conditions. The study offers valuable insights for managers, investors, and policymakers, advocating for long‑term planning in innovation strategies. It enriches the limited body of European‑focused research and stresses aligning corporate strategies with the UN SDGs to drive sustainable development and enhance long‑term organizational performance.

Keywords: Sustainable Development Goals; Innovation Financing; Financial Performance; Return on Investment; Companies

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