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Innovation capability for SME success: perspectives of financial and operational performance

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  • Minna Saunila

Abstract

Purpose - – The relationship between overall innovation and innovation capability, and performance has been a topic of several earlier studies. However, the effects of the aspects of innovation capability on performance of a firm have stayed unfamiliar. The purpose of this paper is to study the relationship between organizational innovation capability and firm performance. The study contributes to the current understanding by presenting the important aspects of organizational innovation capability that affect firm performance. The effects are studied to both financial and operational performance. Design/methodology/approach - – The approach of this study is quantitative. The data used to test the hypotheses were gathered from Finnish small- and medium-sized enterprises (SMEs) with a web-based questionnaire. The sample covered 2,400 SMEs employing 11-249 persons and having a revenue of two to 50 Meuro. The sample was randomly selected. Findings - – The findings showed that three aspects of innovation capability, namely ideation and organizing structures, participatory leadership culture, and know-how development, has some effect on different aspects of firm performance. Surprisingly, the aspects of innovation capability were found to be more influential to the financial performance than operational performance. Practical implications - – The paper contains suggestions for improving performance through developing innovation capability. The paper aims to support practice in two ways. First, organizations can identify aspects of innovation capability that affect operational and financial performance. In that way, organizations can benefit the results by applying these aspects in their everyday operations. Second, the results of the paper may help professionals to begin to understand that leveraging innovation capability may improve an organization's performance. Originality/value - – Previous research has often either concentrated on innovation capability as a one dimension without studying the relationship aspect by aspect or studying only the effects of one aspect of innovation capability. The results of the study take one step further by investigating the relationship of multiple aspects of innovation capability and firm performance.

Suggested Citation

  • Minna Saunila, 2014. "Innovation capability for SME success: perspectives of financial and operational performance," Journal of Advances in Management Research, Emerald Group Publishing Limited, vol. 11(2), pages 163-175, July.
    • Handle: RePEc:eme:jamrpp:v:11:y:2014:i:2:p:163-175
    DOI: 10.1108/JAMR-11-2013-0063
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    Citations

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    Cited by:

    1. Heredia Pérez, Jorge A. & Geldes, Cristian & Kunc, Martin H. & Flores, Alejandro, 2019. "New approach to the innovation process in emerging economies: The manufacturing sector case in Chile and Peru," Technovation, Elsevier, vol. 79(C), pages 35-55.
    2. Zhenia Tahmasebinia & Aliakbar Jokar & Amir Mohebi & Sogand Fardmehregan & Mehdi Beigi & Foozhan Tahmasebinia, 2022. "A Study on the Impact of Market and Strategic Orientations on Business Performance by Emphasizing the Role of Innovation as a Mediator," Business Management and Strategy, Macrothink Institute, vol. 13(2), pages 67-84, December.
    3. Erkut Altındağ & Hande Bilaloğlu Aktürk, 2020. "The Impact of New Generation Management Approaches on the Firm Performance: The Moderating Role of Strategic Human Resource Management Applications," SAGE Open, , vol. 10(3), pages 21582440209, September.
    4. Borah, Prasad Siba & Iqbal, Shuja & Akhtar, Shamim, 2022. "Linking social media usage and SME's sustainable performance: The role of digital leadership and innovation capabilities," Technology in Society, Elsevier, vol. 68(C).
    5. Sachin Modgil & Sanjay Sharma, 2017. "Information Systems, Supply Chain Management and Operational Performance: Tri-linkage—An Exploratory Study on Pharmaceutical Industry of India," Global Business Review, International Management Institute, vol. 18(3), pages 652-677, June.
    6. Inków Monika, 2020. "Organizational innovation capability as a result of knowledge management processes - a literature review," Management, Sciendo, vol. 24(1), pages 143-156, June.
    7. Sikandar Ali Qalati & Dragana Ostic & Gu Shuibin & Fan Mingyue, 2022. "A mediated–moderated model for social media adoption and small and medium‐sized enterprise performance in emerging countries," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(3), pages 846-861, April.
    8. Zulfiqar Ali & Hongyi Sun & Murad Ali, 2017. "The Impact of Managerial and Adaptive Capabilities to Stimulate Organizational Innovation in SMEs: A Complementary PLS–SEM Approach," Sustainability, MDPI, vol. 9(12), pages 1-23, November.
    9. Donard Games & Ranggi Putri Rendi, 2019. "The effects of knowledge management and risk taking on SME financial performance in creative industries in an emerging market: the mediating effect of innovation outcomes," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 9(1), pages 1-14, December.
    10. Sanmugam Annamalah & Murali Raman & Govindan Marthandan & Aravindan Kalisri Logeswaran, 2020. "Embracing Technology and Propelling SMEs through Open Innovation Transformation," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 10(4), pages 95-122.
    11. Ploypailin Kijkasiwat & Pongsutti Phuensane, 2020. "Innovation and Firm Performance: The Moderating and Mediating Roles of Firm Size and Small and Medium Enterprise Finance," JRFM, MDPI, vol. 13(5), pages 1-15, May.
    12. Uzma Haroon & Mohd Noor Mohd Shariff & Mohd Sufli Yusof, 2019. "Exploring the Relationship Between Innovation Capability, Total Quality Management and SMEs Performance in Electric Fan Industry of Pakistan: Moderating Effect of Relational Learning," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 10(3), pages 353-359, May.
    13. Younès El Manzani & Mohamed Larbi Sidmou & Jean-Jack Cegarra, 2017. "A conceptual framework of the relationship between total quality management, corporate social responsibility, innovation capability, and financial performance," Post-Print hal-03207361, HAL.
    14. Khorshed Alam & Adewuyi A. Adeyinka, 2021. "Does innovation stimulate performance? The case of small and medium enterprises in regional Australia," Australian Economic Papers, Wiley Blackwell, vol. 60(3), pages 496-519, September.
    15. Martínez-Román, Juan A. & Tamayo, Juan A. & Gamero, Javier & Romero, José E., 2015. "Innovativeness and business performances in tourism SMEs," Annals of Tourism Research, Elsevier, vol. 54(C), pages 118-135.
    16. Marc Dressler, 2023. "Generic strategic profiling of entrepreneurial SMEs – environmentalism as hygiene factor," International Entrepreneurship and Management Journal, Springer, vol. 19(1), pages 121-150, March.
    17. Martínez-Román, Juan A. & Gamero, Javier & Tamayo, Juan A. & Delgado-González, Loreto, 2020. "Empirical analysis of organizational archetypes based on generation and adoption of knowledge and technologies," Technovation, Elsevier, vol. 96.

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