The financial implications of fit between competitive strategy and innovation types and sources

In recent years American companies have shown considerable interest and commitment to innovation. In their quest for superior financial performance, these companies have explored different types and sources of innovation. This study examines how business-level (competitive) strategy influences companies' emphasis on different innovation types (product, process, and administrative) and sources (incubative, imitative, and acquisitive). Data from 102 businesses (strategic business units, SBUs) suggest that different strategies are associated with distinct patterns of innovation types and sources. Further, the fit between competitive strategies and innovation types and sources is associated with superior company financial performance.