Investigating the Relationship between Organizational Innovation Capability and Firm Performance with Irish SMEs

The topic of innovation capability and its relationship with performance has been examined by several previous studies. The purpose of this thesis is to investigate the relationship between innovation capability aspects proposed by the Innovation Value Institute (IVI) and firms’ overall performance. IVI is specialised in developing organizational and innovation capability in order to improve firms’ performance. In addition, this study presents the most important aspects of innovation capability that are directly and positively associated with firms’ overall financial and operational performance. This empirical study was conducted on small- and medium-sized enterprises (SMEs) in Ireland; the data was collected from both managers and employees through a web-based questionnaire. The survey covered around 650 managers and employees in Irish SMEs that employ from 10 to 249 people and have revenue ranging from €2m to €50m; a total of 107 responses were used for this study. The approach of this study is quantitative; the data was analyzed by linear regression analysis using SPSS software. The findings show that two important aspects of innovation capability, innovation process and leadership management, are directly and positively associated with overall firm financial and operational performance. The practical implications of this study involve enhancing firms’ financial and operational performance through developing innovation capability. Therefore, companies can benefit from the findings of this study by applying or taking better account of these aspects in their daily operations. Most previous studies focused either on studying innovation capability aspects as one group, without examining the relationship aspect by aspect, or just studying one aspect or factor of innovation capability and its relationship with performance. This study examines multiple aspects of innovation capability as well as investigating the relationship between each innovation capability aspect and the firm\u27s overall performance