Impact of Innovation on Organizational Performance

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Arguably, innovation is fundamental to the success of every company because it contributes to financial growth and competitiveness. The incredible success of companies such as Apple has proven the great value of innovation (Tuan, Nhan, Giang & Ngoc, 2016). The current trends in the proliferation of virtual communication and information technology have transformed the way knowledge is managed in the organization as well as the overall operation processes. Specifically, many businesses are taking advantage of creativity and innovation to improve agility, performance, and productivity (Tuan et al., 2016). Additionally, innovation is currently recognized as one of the critical determinants of organizational performance. In light of this, it is believed that innovation significantly contributes to the personal and professional skills development among the employees. Apart from improved performance, innovation enhances the quality of strategic planning and the ability to adopt the dynamic nature of the business environment (García-Zamora, González-Benito & Muñoz-Gallego, 2013). Essentially, organizational performance is the primary indicator of success and most important variables of the effectiveness in the business processes (García-Zamora et al., 2013).

Innovation significantly contributes to organizational performance; thus, undertaking research on this constructs is crucial since it will provide insights into the management of effective methods to employ to facilitate innovation (Tuan et al., 2016). Since focusing on short-term indicators including; sales growth, return on investment and profitability requires the use of appropriate strategies, adopting innovation will instrumentally enhance efficiency in the organizational processes (Mafini, 2015). Nevertheless, the study on this topic has been at the core of management research, insufficient information concerning how innovation contributes to business performance (Mafini, 2015). Since knowledge management is a dynamic and continuous process, understanding the role of creativity in enhancing performance will provide helpful information on how companies can capitalize on innovation to enhance performance and productivity.

Problem Statement

Innovation is embraced by firms to improve the services and products delivered to clients, which eventually leads to improved performance (Bigliardi, 2013). Product, marketing, service, and organizational innovation are crucial components of growth and survival in the turbulent business environment. However, most of the studies investigating the correlation between organizational performance and innovation are inconclusive where some provide a positive relationship while others with a mixed outcome without a definite conclusion (Bigliardi, 2013). Such inconsistency creates the need for most recent research to unveil how adopting innovation contributes to organizational performance and improved productivity. A recent innovation paradigm attributed to creativity and knowledge management indicates that firms must companies must take advantages of emerging opportunities using both internal and external sources of innovation (Bigliardi, 2013). By so doing, there is a high possibility that the employees will utilize their knowledge or develop innovative skills needed to effectively execute day to day roles. Therefore, this gap will be filled by basing on the existing studies and primary data to answer the relationship between organizational performance, innovation, and productivity.

The aim of the Study

The ensuing research aims at examining how innovation contributes to organizational performance and productivity. Due to the ever-increasing competition, firms are capitalizing on modern technology to attain or maintain competitiveness. To survive the fierce competition in the market, organizations are imperatively required to embrace technology vital in enhancing creativity and innovation among the employees. Despite the increasing adoption of these technologies, there is inconsistency regarding whether innovation improve the performance or not. Hence, the findings will provide insights into how management will use innovation to improve performance.

Research Objectives

The following goals will be considered in order to achieve research aims:

1. To determine the impact of innovation on organization performance.

2. To examine how innovation influence employees commitments towards the effective execution of their roles.

3. To evaluate how innovation contributes to increased productivity and organizational success.

Research Questions

a) What are the effects of innovation on firm’s performance?

b) How does the adoption of innovation contribute to employees’ commitments towards meeting personal and organizational objectives?

c) How does innovation improve productivity?

Conceptual Framework

The model refers to a set of principles and ideas that will be used to structure a set of ideas.

Figure 1.1 Conceptual framework

Independent Variable Dependent Variable

Process innovation

Ø Production

Ø Delivery

Innovation Organizational Performance

Business performance

Ø Profits

Ø Efficiency

Source: (Bigliardi, 2013)

Literature Review


Studies indicate that organizational innovation has an immense contribution to different areas which ultimately culminates in an improved performance (Alpay, Bodur, Yilmaz & Büyükbalci, 2012). Presently, innovation is critical for the development of every organization, particularly those striving to maintain competitiveness as well as improving performance. In fact, accurately meeting customer expectation requires the adoption of best practices that promote efficiency in the day to day processes (Alpay et al., 2012). With the fact that companies are facing many problems attributed to stiff competition, embracing innovation is perceived as the most appropriate strategy of boosting performance and productivity. Additionally, businesses engage in continuous improvement programs and activities with the aim of promoting innovation and performance. Innovation is future-focused business development models which identify breakthrough growth opportunities. Bigliardi (2013) proposed that innovation usually accelerate decision making and further challenges an institution to look beyond established boundaries. Similarly, the process allows organizations to translate invention and ideas into products and services that create value for the users. In terms of performance, management evaluates multiple variables including; employee’s contribution and motivation, financial efficiency, products and service benefits for customers, and process efficiency (Bigliardi, 2013). Organizational innovation is fundamental for growth approaches to developing quality products, enter into new markets, and achieving a large market share. Inspired by the growing competition in the international markets, firms have started to grasp the plight of innovation on overall performance and productivity.

Organizational Performance

Organization performance entails real productivity calculated based on the established aims or goals (Mafini, 2015). The concept is defined as the capability of a company to achieve its goals as a result of good governance and a talented workforce which enhance constant rededication vital for improved outcomes (Mafini, 2015). Organizational performance is a primary construct of business success because of its capability to enhance transactional and output efficiency. Ul Hassan, Shaukat, Nawaz & Naz (2013) suggested that this concept is a multidimensional variable characterized by a wide variety of financial and non-profit measures that bolster employees and organizational commitment towards meeting changing customer expectations. Organization performance is also evaluated based on factors such as customer satisfaction which depicts the level of efficiency in the overall processes and final products offered by the firm (Carvalho, Ribeiro, Cirani & Cintra, 2016). These studies support the premise that innovation has a direct relation to organizational performance. Nevertheless, there is limited information concerning the strategies employed by an organization in order to achieve outstanding results (Carvalho et al., 2016). To address these gaps, the ensuing study will critically evaluate existing theories on innovation and organizational performance in order to formulate appropriate answers to the research questions.

Research Methodology

Research Design

In order to explain how innovation contributes to organizational performance, a qualitative approach will be used (Denny & Weckesser, 2018). The method is preferred since it will provide the opportunity to collect comprehensive data about the study problem. As a result, in-depth information based on the research questions will be gathered to enhance an understanding of the impact of innovation on business performance.

Sampling Approach

Non-probability sampling will be applied where five organizations and 5 individuals in the management in each company will be selected. Unlike the probability sampling, this method does not assign equal chances to every participant for being chosen. In this context, non-probability sampling will provide the chance to include respondents who have a comprehensive understanding of the study questions.

Data Collection

Semi-structured interviews and questionnaires will be used to gather primary data from respondents. These instruments are preferred because they are cost effective and simple to administer (Holmes, 2013). Additionally, 2 enumerators will be hired because of their experience and this will inherently increase credibility and reliability of the data.

Data analysis

A thematic approach will be used to analyze the collected data because it will offer the chance to focus on specific themes when answering the study questions. The approach involves the identification of particular patterns and themes from the data, which will eventually allow the formulation of appropriate answers to the study questions.


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January 19, 2024

Business Science


Management Technology

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