Innovation dimensions and firm performance synergy in the emerging market: A perspective from Dynamic Capability Theory & Signaling Theory

ContextIn this rapidly changing business environment, innovation is the key requirement to gain a sustained advantage over competitors. Innovation helps firms grow more quickly than others grow, survive in the harsh & highly competitive business environment, and eventually become a market leader.PurposeIndia is an emerging market, and many companies are entering here and making it highly competitive. The limited study is available to measure the effect of innovation in Indian Business. Thus, the study establishes a relationship between innovation and firm performance in the Indian setting.Design/methodology/approachThis is a perception-based study and used established subjective scales to measure innovation and firm performance. I validated the scale using the measurement model in AMOS. The survey used to collect around 250 cross-sectional data from middle & higher management executives of Indian firms. Structural equation modeling in AMOS was used to test the hypothesis.FindingsThe results showed that product and marketing innovation has a significant and positive impact on the dimensions of firm performance. In contrast, Process innovation showed an indirect effect mediated through marketing innovation. These outcomes will be beneficial for the industries for taking proactive measures.Originality/valueThe examination of mediation relationships between Marketing innovation and Product & Process innovation is limited. Novelty also lies in analyzing the impact of multiple innovation types on multiple dimensions of firm performance in Indian firms to verify dynamic capability and mediating effect of marketing innovation in Indian demography to validate the signaling theory perspective. Rigor in research methods like Scale and sampling method verification test, i.e., CMB. Heteroscedasticity and Endogeneity test for applicability of OLS and verifying exogenous variables.