Innovation orientation and its relationship with business performance: moderating role of firm size

The study aims to test the relationship between innovation orientation (INO) and business performance. It also explores the moderating effect of firm size on the relationship between INO and business performance.

A purposive sample of 278 firms (manufacturing and service) was taken from the National Capital Region and the Punjab state of India. The survey questionnaire was administered to two to three managerial-level employees from each of the 278 firms. Exploratory and confirmatory factor analyses were used to validate the INO and business performance scales. The hypotheses were tested using multi-group moderation analysis and structural equation modeling.

The study shows that INO has a significant positive effect on business performance. The results have indicated that firm size (based on the number of employees) moderates the relationship between INO and business performance. However, firm size (based on investment) does not moderate the relationship between INO and business performance.

The study is an attempt to synthesize the fragmented results testing innovation–performance relationship using firm size as a moderator on the relationship between INO and business performance and provides insights for both academicians and practitioners.