The Direct and Indirect Effects of Innovative Capability on Firm Performance: Evidence from Micro and Small Family Businesses in Ghana

Abstract

This chapter examines how innovative capability influences performance directly and indirectly through competitive strategy in family businesses. We used data from 321 micro and small family businesses in Ghana and the bootstrap procedure suggested by Preacher and Hayes (2008: Asymptotic and resampling strategies for assessing and comparing indirect effects in multiple mediator models. Behavior Research Methods, 40, 879–891) to test our hypotheses. The findings indicate that innovative capability directly influences the performance of micro and small family businesses. However, the mediation analyses show that only the competitive strategy of differentiation mediates the relationship between innovative capability and performance. We found no relationship between cost leadership strategy and the performance of micro and small family businesses in Ghana. Implications are discussed.