The Role of Innovation Capability to Promote Business Performance Through Successful Strategy Execution: from Middle Managers’ Perspective

Abstract

The purpose of this study is to examine the role of innovation capability to promote business performance through successful strategy execution, specially from middle managers' perspective in Indonesia by testing a hypothesized model. A quantitative survey was conducted with 500 'middle managers' in Indonesia in 2016, through the questionnaire with simple random sampling and the hypothesis were tested with SEM analysis. The results showed that creative leadership affects the organization's performance, especially for financial performance. Creative leadership has positive and significance impact towards innovation capability and successful strategic execution that leads into positive results on financial performance. However, the interesting result has been discovered when creative leadership and innovation capability does not has direct and significance effect on financial performance. The findings suggest that to give an immediate result to financial performance in a creative industry, creative leadership will lead the innovation capability that will be impactful on successful strategic execution that will give indirect effect on financial performance; while the innovation capability will not have direct impact on financial performance. To conclude a creative leadership and innovation capability will not have direct effect to financial performance, but both variables need successful strategic execution to give effect to financial performance.