Playing 3D chess, or how firms can thrive under complexity: The mediating role of innovation capabilities in the use of innovation input

Firms differ not only in their investments in input for innovation but also in their innovation capabilities, i.e., their ability to transform innovation input into innovation output and commercial gain. This paper brings together the process- and management-oriented factors that determine innovation outcomes. Specifically, we attempt to incorporate innovation capabilities into the innovation process and analyze their role in converting innovation input into innovation output and, ultimately, value creation. We also hypothesize about the influence of contingencies on these relationships, most notably the role of procedural and contextual complexity. By using a cross-national data set of over 4500 firms along with dynamic capabilities theory, we find that innovation capabilities enhance the innovation process by improving firms' transformation of innovation input into innovation output. We also find support for our hypothesized role of complexity.