Role of innovation in the relationship between organizational culture and firm performance

Purpose The purpose of this paper is to examine the mediating role of innovation on the relationship between organizational culture and firm performance. Design/methodology/approach Data for the study were collected through a survey from 154 branches of ten prominent banks in Turkey and responses were analyzed to assess the relationships between organizational culture, firm performance and organizational innovation. Findings The findings reveal that in the banking sector, although organizational culture and innovation have a direct and positive effect on the firm performance dimensions, organizational culture was found to have an insignificant regression coefficient on the dimensions of firm performance in the presence of organizational innovations. Practical implications These findings provide useful insights for organizations, particularly in the banking industry, seeking to be competitive and responsive to environmental changes by successfully introducing innovations. Conclusions emphasize that mechanisms to encourage and foster an innovative culture in the organization are likely to facilitate the introduction, adoption and diffusion of innovations which, in turn, is likely to result in achievement of superior firm performance. Originality/value Organizational culture has been studied in the literature as one of the characteristics impacting the firm's performance. But there is a paucity of research which models and empirically studies the relationship between organizational culture and the firm performance. In addition, several researchers have studied organizational innovation as a driver of firm performance but fewer researchers have studied organizational innovations as being impacted by organizational culture. In this study, the paper examines the relationship between organizational culture and firm performance and the role of organizational innovation in this relationship. This research makes an important contribution to the existing literature by empirically examining the relationship between organizational culture, innovations and firm performance.