The causal effects of product innovation, web technology and vertical integration on firm efficiency in the fashion industry

Abstract

This paper examines the interaction among product innovation, web technology and vertical integration, and their effects on firm efficiency in the fashion industry. One contribution of this work is that we do not assume the effect of these variables on firm efficiency to be monotonic. Additionally, rather than using standard financial ratios, we use the Data Envelopment Analysis (DEA) methodology to measure efficiency. Our results indicate that product innovation has a monotonic and positive effect on efficiency. On the contrary, web technology, as a process innovation, does not always positively affect firm efficiency: it exerts a negative effect during the first stages of the technology implementation, and then it becomes positive when the implementation is more advanced. On the other hand, web technology moderates positively the effect that vertical integration has on efficiency.