Investigating innovation capability and organizational performance in service firms

• Date: 01 January 2020
• DOI: http://doi.org/10.1002/jsc.2314
• Author: Jeremy B. Zwiegelaar,Arvind Upadhyay,Jamil Al‐kalouti,Jose A. Garza‐Reyes,Niraj Kumar,Vikas Kumar
• Published date: 01 January 2020

RESEARCH ARTICLE

Investigating innovation capability and organizational

performance in service firms

Jamil Al-kalouti

1

| Vikas Kumar

1

| Niraj Kumar

2

| Jose A. Garza-Reyes

3

|

Arvind Upadhyay

4

| Jeremy B. Zwiegelaar

5

1

Bristol Business School, University of the

West of England, Bristol, UK

2

University of Liverpool Management School,

University of Liverpool, Liverpool, UK

3

Centre for Supply Chain Improvement, The

University of Derby, Derby, UK

4

Brighton Business School, University of

Brighton, Brighton, UK

5

Oxford Brookes Business School, Oxford

Brookes University, Oxford, UK

Correspondence

Vikas Kumar, Bristol Business School,

University of the West of England, Bristol,

BS16 1QY, UK.

Email: vikas.kumar@uwe.ac.uk

Abstract

In the service firm, innovation capability influences both financial and nonfinancial

performance. It is crucial for businesses to address key challenges anticipated by the

changes in socioeconomic and environmental issues. Innovation capability is largely

seen as a vital source for generating sustainable competitive advantage. This article

investigates the determinants of innovation capability and their relationship with

organizational performance in the Jordanian banking sector.

1|INTRODUCTION

Stakeholders’value creation has been the key driver for most business

activities in today's economic environment. Huge investments have

been made to develop sources for sustainable competitive advantage

to improve overall business performance (Franco-Santos, Lucianetti, &

Bourne, 2012). In the last few years, business environment is charac-

terized as unstable and dynamic. Consequently, organizations need to

continuously innovate and improve their performance to cope with

market uncertainty while simultaneously outperforming their rivals

(Taticchi, Tonelli, & Cagnazzo, 2010). Pandy (2005) argued that orga-

nizations do their best to find the optimal way to develop and pro-

mote their performance, use the best strategy that leads to goal

achievement, and try to get the highest level of profit. In an unstable

economic environment, it becomes necessary to continue improving

the factors which can help to innovate. Given the nature of highly tur-

bulent business environment, Melnyk, Bititci, Platts, Tobias, and

Andersen (2014) suggested the need for finding out-of-box innovative

solutions. They emphasized that businesses need new approaches

and models for innovation to compete and retain competitive advan-

tage. A positive innovative climate is also vital for an organizations’

success and performance improvement (Kohler et al., 2010). It can be

argued that innovation has emerged as one of the mainstream

research topics in last decade.

In the 21st century, Innovation is crucial for businesses to address

key challenges anticipated by the changes in socioeconomic and envi-

ronmental issues (De Medeiros, Ribeiro, & Cortimiglia, 2014; Pfeffer &

Sutton, 2000). Jaskyte (2011) indicated that innovation also creates

value for customer as it satisfies the needs of existing customers and

market in creative ways. Many scholars have suggested that innova-

tion leads to development of new products and new production tech-

niques as well as opening new markets, the use of new sources of

supply and new forms of competition (Śledzik, 2013). Literature

shows that innovation leads to change in organizations and also helps

them to establish competitiveness. It is found that both the new inno-

vative products and design help to maintain market share of the com-

pany and increase profits in those markets (Gaynor, Bradner, Iansiti, &

Kung, 2001).

Over the years, a number of researchers have shown that innova-

tion affects organizations’performance (Alegre, Sengupta, & Lapiedra,

2013; Alexander, 2015; Hult, Hurley, & Knight, 2004; Johnston &

Michiel, 1990; Laursen & Salter, 2006; Saunila, Pekkola, & Ukko,

2014; Weiss & Anisimova, 2018). Saunila et al. (2014) argue that inno-

vation capabilities can lead to improved performance. Organizational

performance can be improved and developed through innovation

supported by various factors such as environment, organizational

JEL Classification Codes: O31, L25, G21, D22.

DOI: 10.1002/jsc.2314

Strategic Change. 2020;29:103–113. wileyonlinelibrary.com/journal/jsc © 2020 John Wiley & Sons, Ltd. 103