Organizational resources, external environment, innovation and firm performance: A critical review of literature

Abstract

Explaining why organizations in the same industry and markets differ in their performance remains a fundamental question within strategic management circles. Researchers have partly attributed the variation to a number of factors among them industry structure, resources of a firm, and continuous innovation that keep a firm a head of competition. On a global scale, there is continued search for the sources of variation in firm performance. As part of this effort, this paper reviews literature on factors that have partial explanation to variation in organization performance namely: organizational resources, external environment and innovation. It is apparent from literature that organization resources have a direct impact on performance. However, this influence is subject to other factors key among them the external environment and innovation. In an attempt to bring out extant gaps on how the resource - performance relationship is influenced by the external environment and innovation, this paper observes that these factors have been found to have independent effect on performance. However, their role in this respect remain scanty, both conceptually and empirically. To contribute to the current state of knowledge in this front, the paper proposes a conceptual model that can guide an empirical investigation on the influence of external environment and innovation on the relationship between organizational resources and performance. The empirical research, it is hoped will address the identified gaps.