Does organizational innovation always lead to better performance? A study of firms in Vietnam

Abstract:

Purpose
The purpose of this paper is to explore the relationship between organizational innovation and performance of firms in Vietnam.

Design/methodology/approach
Based on the literature review, the author proposed five hypotheses covering the relationships between different aspects of organizational innovation and firm performance. Data collected from a survey of 266 firms in Vietnam were analyzed to test the proposed hypotheses.

Findings
Two out of three aspects of organizational innovation, including “innovation in business practices” and “innovation in workplace organization,” are significantly positively associated with firm performance. However, there was no evidence to support the relationship between firm performance and the third organizational innovation aspect, “organizational innovation in external relations.” The results also show that the interaction terms among three aspects of organizational innovation do not have significant impacts on firm performance.

Practical implications
Firms in Vietnam should pay more attention to innovation in business practices and innovation in workplace organization since two aspects have clear positive influences on performance. Moreover, firms can perform each of the organizational innovation aspects independently or in parallel, as the implementation of organizational innovation in one aspect does not influence the impact on the firm performance of organizational innovation in other aspects.

Originality/value
This study provides important insights into the widely recognized yet little-researched relationship between organizational innovation and firm performance and concludes that organizational innovation has a positive impact on firm performance.