Antecedents and performance outcomes of innovation capability in small-medium enterprises

Abstract

To achieve sustainable competitive advantage in the contemporary business environment organizations are continually demanded to develop the propensity to innovate. Accordingly, this has led to increased interest in understanding the factors driving innovation capability in organizations. Nevertheless, the Sri Lankan manufacturing sector has a laid-back approach pertaining to innovations. This study examines the antecedents of innovation capability and performance outcomes of innovation capability in SMEs by integrating the resource-based view and dynamic capability view. To achieve this objective this study adopted an explanatory research design and collected data from 190 manufacturing sector SMEs in Sri Lanka. Structural equation modelling was used to analyze the relationship between antecedents of innovation capability and its impact on product innovations and process innovations. Accordingly, the empirical findings of the current study contributed to the innovation management literature by validating a new framework based on seminal arguments of RBV and dynamic capability view to determine the antecedents of innovation capability in the manufacturing SME sector. Moreover, the findings of the study theorized that the identified antecedents of innovation capability will positively influence product innovation capability and process innovation capability.