The Impact of Financial Management on Innovation

Abstract

At the current stage of development of Russias financial system, with quite high risks and interest rates, with only just gaining strength the stock market and the upcoming large-scale entering the domestic companies interest in the theory and practice of functioning of developed markets for financial instruments is obvious. Today, Finance of a business entity is an indicator of its competitiveness, indicator of its viability in a market economy. The complexity and diversity of internal and external financial relations of the enterprise determines the need for the effective management of its finances. Financial management of individual businesses was allocated in the countries with developed market economies in the early twentieth century in a special field of knowledge which is called financial management. The effectiveness of each control system largely depends on its information systems. In conditions of transition to market economy the known formula time-money is supplemented with the similar formula: The information - money. With reference to financial management it acquires a direct sense. In the current competitive market, innovation has become a crucial element for organizations, willing to grow. Financial management in this regard is playing a significant role in improving firms innovation capacity. This research paper evaluates the impact of financial management components on innovativeness of Austrian SMEs. Using data of 118 employees from 41 SMEs operating in Austria, the research finds a significant impact of the financial management model on firms innovation. The three components: liquidity, controlling, and financial literacy are statistically significant is explaining innovativeness at 1% level. The study suggests focus on the three financial management constructs in order to improve their innovation capability and capacity.