Abstract
The purpose of our study is to examine the mechanisms that link environmental dynamism to firms’ innovation performance. Although there have been extensive studies on the effect of environmental dynamism on innovation performance, they have focused primarily on its direct effect and have resulted in rather inconsistent research findings. Thus, to explain the relationship between environmental dynamism and innovation performance more clearly, we intend to investigate the mechanisms through which environmental dynamism influences innovation performance in this study. Specifically, we aim to examine the mediation effects of strategic prospecting, absorptive capacity, and combined strategic prospecting–absorptive capacity on the relationship between environmental dynamism and innovation performance. Based on data collected from 266 small and medium-sized firms in Korea, our study has found that, assuming a causal interdependence between the mediators, both strategic prospecting and combined strategic prospecting–absorptive capacity mediate the relationship between environmental dynamism and innovation performance. It has also been found, however, that absorptive capacity alone does not mediate the relationship between environmental dynamism and innovation performance, while absorptive capacity mediates the relationship when it is linked to strategic prospecting. The results of our study further reveal that no direct effect of environmental dynamism on innovation performance exists, implying that the significant effect of environmental dynamism on innovation performance demonstrated in previous studies may be spurious in nature. Based on the findings, we present conclusions, theoretical and practical implications, and limitations with future research directions.
Highlights
Under the context of dynamic changes in the environment with the trend of the Fourth Industrial Revolution, firms have exhibited great interest in innovation as a means of responding to environmental changes effectively for their sustainable competitive advantage [1]
We propose the following mechanisms for the first time in the literature that connect environmental dynamism with innovation performance: (1) strategic prospecting [17], based on the industrial organization theory that argues for an alignment between the environment, strategy, and performance [18]; (2) absorptive capacity [19], based on the dynamic capability theory that claims that there is an alignment between the environment, capability, and performance [20]; and (3) strategic prospecting–absorptive capacity, based on the strategic fit perspective that argues for an alignment between the environment, strategy, capability, and performance [21]
We address the following original research questions: (1) does environmental dynamism have a direct effect on innovation performance? (2) Does strategic prospecting mediate the relationship between environmental dynamism and innovation performance? (3) Does absorptive capacity mediate that relationship? (4) Does strategic prospecting–absorptive capacity mediate that relationship?
Summary
Under the context of dynamic changes in the environment with the trend of the Fourth Industrial Revolution, firms have exhibited great interest in innovation as a means of responding to environmental changes effectively for their sustainable competitive advantage [1]. A review of the literature reveals that existing studies on this issue tend to focus primarily on the direct effect of environmental dynamism on innovation or innovation performance. Martinez-Conesa, Soto-Acosta, and Carayannis [8] have examined whether environmental dynamism has a direct influence on open innovation for small and medium-sized manufacturing companies in Spain. Turulja and Bajgoric [14] have examined whether environmental turbulence has a direct effect on product and process innovation for companies in Europe, and Soto-Acosta, Popa, and Martinez-Conesa [15] have studied the direct influence of this factor on radical and incremental innovation for SMEs in Spain. A summary of the literature review is provided in Appendix A
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