Exploring the innovation capability and entrepreneurial orientation relationship: A case approach

This exploratory research builds upon prior entrepreneurship research by investigating the relationships between firm innovation capability (IC) and the entrepreneurial orientation of the firm (EO). EO describes the organisational processes, methods, practices, and decision-making approaches that lead to new entry. IC is the ability to continuously transform knowledge and ideas into new products, processes and systems for the benefit of the firm and its stakeholders. IC has also been described as a special asset of a firm that gives it the ability to quickly and successfully adopt new processes and methods and develop and introduce new and improved products to compete more effectively in a rapidly changing environment. Prior research has examined EO and IC independently but has not examined to what degree the two constructs are related and to what extent they collectively contribute to firm performance. Evidence indicates that each construct is positively related to firm innovation performance as well as to firm overall performance. As part of a larger research program, this study deconstructs the underlying EO and IC dimensions to identify relationships between these dimensions with the aim of identifying the independence of these two constructs. The research is important since more entrepreneurial and innovative firms are needed. In the current organisational climate, firms are facing rapidly changing and uncertain operating environments. Increasing rates of globalization and technology change has brought increased competition and has made it harder for businesses to develop and maintain competitive advantage. A number of researchers have addressed the implications of these external forces and have identified entrepreneurship and innovation as a necessary basis for competition and as the key driver for survival and sustainable growth. In particular, innovation has been found to be a requirement for manufacturing enterprises to survive and grow, and EO has been found to be an essential feature of high performing businesses. The research makes a contribution at two levels. It extends the literature by developing a more holistic EO and IC theory. At an applied level, the research provides insights into the development of training and skills development programs to help firms build their capabilities to support innovation and entrepreneurial activities.