Innovation capability as a catalyst: unravelling the mediating effect between entrepreneurial orientation and firm performance in family businesses

Abstract

The study aims to investigate the mediating effect of innovation capability (IC) in the relationship between entrepreneurial orientation (EO) and firm performance (FP) in family businesses in India. In this study, we proposed a conceptual framework that adopted the diffusion innovation theory. Data collection was through structured questionnaire online survey, and non-probability purposive sampling method was used. Descriptive analysis through SPSS and hypothesis testing were done using PLS-SEM through smart PLS 4.0 software. The research model was examined using structural equation modelling. The study findings reveal entrepreneurial orientation positively influences the firm performance. The findings further disclosed that entrepreneurial orientation is positively related to innovation capability. Finally, innovation capability mediates the positive relationship between entrepreneurial orientation and firm performance. The study contributes to the literature by demonstrating how innovation capabilities and entrepreneurial orientation affect family business performance. Hence, the present study has numerous theoretical, research, and practical implications and limitations.