Understanding the links among innovation performance market performance and financial performance

Abstract

Innovation and its impacts on business performance are strategically vital deliberations for modern business organizations. In this study we examine how innovation performance affects two different facets of firm performance: market performance and financial performance. Many studies address the relationship between innovation and business performance but few empirical studies analyze the interplay between those variables. Research results reveal a suppression effect of market performance on the innovation-financial performance relationship. We find a negative direct relationship between innovation and financial performance, however market performance reverses this negative effect to a positive total influence through its suppression effect. This result indicates the vital role of market performance in converting innovation to positive financial outcomes. The proposed mediation model is relevant regardless of the set of firm-level and environmental contingency variables.