Synergies of firms' innovation dynamic capabilities and information technology: a study of Saudi firms’ innovation performance and practices

Abstract

The ability of firms to innovate has become a cornerstone in the economy of many developed and developing countries. The performance of firms is not exclusively linked to their internal capability. Other external factors, such as technology, globalisation of the market, knowledge, and evolving approaches to value offering, force them to constantly change their approaches to wealth creation. Innovation is vital for firms’ competitive advantage. Hence, a firm with higher innovation prosperity compared to its rivals has a crucial advantage that enables it to compete in local and global markets. However, innovation is a complex phenomenon, and a holistic view is required for a deep understanding of the factors that influence firms’ innovation performance. Day after day, markets are becoming more dynamic, increasing the necessity to understand how such momentum affects innovation performance. With a focus on how they develop strategic routines that enhance their assessment of opportunities and resource-configuration capabilities, firms may better align their products and services with market demands. Using state-of-the-art dynamic-capability theory, this research highlights the routines of firms that influence their abilities to acquire and multiply knowledge and technology consistent with market status, leading to more novel and successful innovative products and processes as well as better economic advantage. This research aims to provide a framework that comprises factors that may influence Saudi firms’ innovation performance. Furthermore, the research aim attempts to understand the impact of information technology on firms’ innovation performance. The research is based on survey data from 203 Saudi firms registered at the Riyadh Chamber of Commerce and Industry. The empirical results suggest that firms may enhance their ability to acquire, assimilate, transform, and exploit knowledge by increasing their breadth of knowledge sources and by internationalizing their searching activities for knowledge and skills. Moreover, both explorative and exploitative innovation strategies, although paradoxes, are significant to increasing firms’ overall innovative performance. Mutually, information technology (IT) plays a critical role in complementing firms’ dynamic capabilities through better provision of IT infrastructure, while IT effectiveness and IT flexibility are vital to increasing firms’ abilities to maintain both long-term and short-term competitiveness.