An Empirical Examination of Innovation Management System and Financial Performance

Abstract

The aim of this paper is to examine the relationships between the components of organizational-level innovation management system, i.e. innovation orientation and innovation capability, and financial performance, i.e. profitability and growth. The novelty of this paper stems from the concomitant examination of the relationship between innovation orientation and innovation capability, i.e. the ‘willingness’ to innovate and the ‘ability’ to do so. As organizations develop innovations in open sociocultural systems, this paper also aims to uncover possible performance synergies in the strategic orientation layer (innovation orientation and market orientation) and in the capability layer (innovation capability and customer relationship management capability) of an organization. When empirically examining components of organizational-level innovation management system, it is found that innovation capability is the engine of innovation management system that translates the value of innovation orientation to financial performance outcomes. The results also shed light on possible synergistic effects between strategic orientations and organizational capabilities. Furthermore, empirical results suggest that innovation orientation and market orientation have positive complementary effects on innovation capability.