Impact of Innovation Strategies and R&D Investment on Organizational Performance

Abstract

The use of innovation strategies and research and development (R&D) investment is becoming a core source of organizational performance sustainability among organizations that are based on dynamic and highly competitive markets. This paper explored the direct relationship between innovation strategies and intensity of R&D investments and organizational performance in the manufacturing and service industries in Pakistan. The quantitative cross-sectional survey design was used and data gathered by a survey of 300 employees and managers on a structured questionnaire that had validated scales used to measure all the constructs and were all on a 5-point Likert scale. The convenience sampling was embraced because of the limitations of accessibility. The SPSS 25 and AMOS 24 descriptive statistics, Cronbachs alpha reliability test, Pearson correlation test, confirmatory factor analysis (CFA) and structural equation modeling (SEM) were used to analyze the data. Findings showed that innovation strategies had a strong positive direct impact on the organizational performance ( beta = 0.54, p <.001) and the R&D investment intensity also showed a strong positive direct impact ( beta = 0.41, p <.001). The organizational performance was overall expounded by 63.7% by the structural model (R-squared = .637). The measurement model had a high construct validity with all the AVE values being above .50 and composite reliability coefficients above.85. The findings highlight the strategic need of the long term investment in innovation and the planned innovation strategy development to organizations in the changing economic landscape in Pakistan in order to enhance financial, operational and competitive performance outcomes. The research adds empirical results in the context of developing economy to the body of literature related to innovation management and organizational performance in the world.