Innovation and firm performance: the role of absorptive capacity and technological capability

Innovation has shown to provide significant contribution to the competitiveness of the organisation. Hence, it is important to know how to integrate the absorptive capacity and technological capability into the innovation strategy because they influence the firm in creating innovation, determining the firm performance. The purpose of this article is to elaborate the role of absorptive capacity and technological capability support in developing firm’s innovation. This study uses samples of 143 food sector SMEs in Malang Raya, Indonesia. Partial least square (PLS) was then employed in order to test the validation model and the research hypotheses. The results showed that both absorptive capacity and technological capability have positive effects on innovation. Whereas the innovation has positively associated with the firm performance. The study is quite beneficial to better understand that firms should take into account the key strategic roles and how to improve innovation for organisational success.