THE IMPACT OF INNOVATION ACTIVITY ON THE INVESTMENT VALUE OF A BUSINESS: EVIDENCE FROM SMALL SERVICE ENTERPRISES IN SAMARKAND, UZBEKISTAN

Abstract

This study investigates the relationship between innovation activity and the investment value of small service enterprises in Samarkand, Uzbekistan. While innovation is widely promoted as a driver of competitiveness, its direct impact on business valuation—particularly in emerging Central Asian economies—remains underexplored. A survey of 20 small enterprises (cafés, beauty salons, photo studios, and IT service providers), supplemented by semi-structured interviews with owners and local investors, was conducted in May 2025. Investment value was assessed via three approaches: (1) owner–investor perceived valuation multiples (EV/EBITDA), (2) discounted cash flow (DCF) projections, and (3) willingness-to-invest (WTI) scores from mock investor panels. Results show a strong positive correlation between the breadth of innovation adoption (measured by Oslo Manual criteria) and investment value: enterprises implementing ≥2 types of innovation demonstrated, on average, a 24.7% higher EV/EBITDA multiple and 31% higher DCF-based valuation (p < 0.05). Product and process innovations showed the strongest marginal effects, while marketing innovations contributed mainly to perceived growth potential. Key mediating factors included improved cash flow predictability, reduced operational risk, and enhanced scalability—all critical for investor confidence. The findings confirm that even modest, low-cost innovations significantly enhance investment appeal in resource-constrained contexts. The study provides actionable insights for SME owners seeking valuation growth and for policymakers designing innovation-support instruments in Central Asia.