The relationship between innovation capability and performance

Abstract

Purpose – The purpose of this paper is to discuss whether performance measurement moderates the relationship between innovation capability and firm performance. Design/methodology/approach – The study was conducted through a web-based survey in small- and medium-sized enterprises (SMEs). A total of 311 responses were received from a sample of 2,400 randomly selected SMEs. Findings – Consistent with predictions, the link between innovation capability and firm performance is significant in the presence of performance measurement. Performance measurement can thus be used as a tool for improving the performance of SMEs through innovation capability. Practical implications – Using the results of this study, practitioners can improve their innovation capability through performance measurement by taking better account of various aspects. Originality/value – Previous research has studied the effects of performance measurement, but not in the area of innovation management. Previous research has also showed that measurement has positive effects on innovation capability. The present study goes one step further by investigating the impacts of measurement on the relationship of multiple aspects of innovation capability and firm performance.