Investigating the relationship between innovation strategy and performance

This research investigates how firm size and the type of offering (product or service) moderate the relationship between innovation strategy and performance. The results from two studies involving samples of managers of firms in the United States show that firm size and type of offering do indeed moderate the relationships between innovation strategy and performance and that dual moderating effects exist. The results challenge prevailing notions on expected benefits of exploration and exploitation strategies for smaller to larger firms. Nonlinear moderating effects by firm size are revealed, which offer more nuanced insights than those presented in existing research. Moreover, while it is generally presumed that service firms benefit primarily from an exploitation innovation strategy, the findings indicate that service firms actually benefit from an exploration innovation strategy regardless of size. The findings further suggest that the performance implications of innovation ambidexterity vary across contexts. Managerial and research implications are discussed.