The impact of business process agility and innovative capability on firm performance: the moderating role of turbulent environment

Abstract

Today, the business environment is highly turbulent hence, firms are becoming more agile and innovative for their survival. Despite a few studies on business process agility and innovative capability, there is a limited understanding of how agility and innovative capability impact firm performance in the context of the turbulent environment. Drawing on the dynamic capability theory, this study examines how business process agility and innovative capability under turbulent environment impact on firm performance. Using the survey data of 188 senior IT and business executives from Sri Lankan firms, we find a positive and significant link in the proposed model. This study confirms that though the aggregated turbulent environment failed to show a significant impact, the market turbulent is significant between agility - firm performance and innovative capability – firm performance relationship. Theoretical and practical implications are also discussed.