Multi-Dimensional Effect of Innovation Capability on Firm Performance with The Mediating Role of Technological Innovation and Non-Technological Innovation: An Empirical Study on Pakistan’s Software Sector

Abstract

Software firms surely serve to sustain economic growth in developing countries. The challenging competition due to shorten product life cycles, developing technology and changing customer needs acts as major concern for the software sector for which having innovation capability seems to be a pinnacle success factor in such hyper-competitive environment. There is a need to determine the key factors that impact the firm performance. Different software firms that are working in different cities of Pakistan contributed in this survey based study. Current study builds a model related to necessary factors that influence the firm performance such as innovation capability, technological innovations, non-technological innovation and firm performance. The studys main goal is to determine the effect of multidimensional variable such as innovation capability on firm performance with the mediating role of technological innovation and non-technological innovation based on an empirical study covering the software sector of Pakistan. Absorptive capacity and strategic orientation, dimensions of innovation capability influence the technological and non-technological innovations in software firms. Study adopted a quantitative approach and gathered 275 usable questionnaires from software firms employees in Pakistan. Findings revealed that innovation capability has a statistical significant relation with firm performance. Additionally, mediating role of technological innovation and non-technological innovation is also established. Results of this study could lead to effective management of innovation capability that improves firm performance by delivering more effective innovation outcomes.