Innovations and service firms’ performance: a firm-level mediating and moderating effects analysis for India

Abstract

Purpose This study aims to identify the effects of innovation types on the service firm’s financial and nonfinancial performance as well as mediation and moderation effects of innovation and the firms’ performance linkages in the Indian service sector. Design/methodology/approach This study uses combined data from the World Bank innovation survey 2014 and World Bank enterprise survey (WBES) 2014 for India. It classified innovations into technological innovation (service and process) and nontechnological innovation (organizational and marketing) and used financial and nonfinancial performance measures. This study applies variance-based partial least square structural equation modeling (PLS-SEM) using Smart PLS 3 software. Findings The study results suggest that service innovation has the highest significant effect on a firm’s financial and nonfinancial performance, followed by process innovation. Marketing and organizational innovation have a long route to contribute to a firm’s financial performance via innovative and nonfinancial performance. The study results do not find any synergy effects of innovation types. Multi-group analysis (MGA) results suggest several significant distinctions in the path relationships between small and medium-sizes and large firms. Originality/value This study provides several crucial policy suggestions for the managers and policymakers concerning the effects of service and process innovation on service firms’ performance in India and the mediating factors of these relationships. The study suggests that managers should pay the highest importance to service innovation to swiftly and markedly surge service firms’ financial and nonfinancial performances. In contrast, a service firm’s innovative performance mainly results from its organizational and marketing innovations.