HOW PRODUCT, OPERATIONS, AND MARKETING SOURCES OF IDEAS INFLUENCE INNOVATION AND ENTREPRENEURIAL PERFORMANCE IN AUSTRALIAN SMEs

In this paper we have used structural equation modelling to examine the inter-relationships among specific intangible resources — product, operations, and marketing sources of ideas — as they relate to innovation and firm performance. Prior studies founded upon the Resource Based View (RBV) of the firm, have focused on the relationship between innovation and firm performance or resources and firm performance, but have not examined both simultaneously. Our study reveals how the sources of ideas, as valuable strategic firm resources, directly, and/or indirectly via innovation activities, contribute to firm performance. We find that marketing sources of ideas directly influences firm performance and that product and operations sources of ideas do not. Indirectly, however, all three sources of idea resources (marketing, operational, and product) contribute to firm performance via the innovation construct. Thus, ideas, and where they come from, are crucial to understanding innovation and firm performance. Innovation is a key component in the structural model because it partially mediates the marketing idea sources-performance relationship. It also provides the basis for interaction effects among operations and product resources and firm performance. Therefore, including innovation in the conceptual model improves the model specification as it increases insight into the resource-performance relationship.