Innovation Capabilities as a Mediator between Business Analytics and Firm Performance

Abstract

Although business analytics (BA) play an important role in improving firm performance, various firms struggle to deliver their full benefits. Many researchers have investigated the capabilities required to achieve better value through BA, but none have addressed the impact of innovation capabilities as a contextual variable mediating the effects on firm performance. By adopting the Technology-Organization-Environment (TOE) framework, this study suggests a model to evaluate the impact of BA capabilities on firm performance and addresses the mediating role of innovation capabilities. A quantitative approach was adopted for data collection and analysis. Based on 386 surveys of BA experts at Saudi Arabian firms and the use of PLS-SEM to test and validate the model. The results show that organizational factors have a highly significant impact on firm performance. While IT infrastructure and information quality as technological factors showed no significant and positive effect. Furthermore, the findings revealed that innovation capabilities positively mediate the link between IT infrastructure and information quality and firm performance as it affects directly and indirectly firm performance. The findings of this study contribute to the literature by addressing the research gap in BA in the Saudi Arabia context. Moreover, the study result stressing about the role of innovation capabilities on the BA capabilities and the importance of considering the interaction between TOE factors. However, research was carried out within one developing country (Saudi Arabia), which might restrict the findings’ generalizability of the study, and the results must be generalized with care to avoid issues such as structural and cultural variances between developed and developing countries.