EXPLORING FIRM INNOVATION CAPABILITY AS THE 'BLACK BOX' BETWEEN HUMAN CAPITAL AND PERFORMANCE IN RUSSIAN SMES

This study examines the mediating role of firm innovation capabilities as a strategic choice for Russian small and medium-sized enterprises (SMEs), which translates their managerial and worker human capital stocks into enhanced firm performance. The results of a survey conducted on 366 CEOs and business founders indicate innovation capabilities are the intermediate variable between firm human capital and SME performance. Further parallel mediation regression analysis demonstrates that human capital is positively and significantly related to all innovation capability dimensions (client-, marketing- and technology-focused); however, the mediation effect is significant only in the case of client-focused innovation capability-SMEs' ability to provide clients with services that offer unique benefits, solve clients' problems in innovative ways and seek out novel ways to tackle problems. These findings suggest that SMEs operating in turbulent transition economy environments can be more innovative and achieve the best performance using intangible, highly valuable and rare talent resources.

Automated summary

This study finds that innovation capabilities mediate the relationship between firm human capital and SME performance. The results show that human capital is positively related to all dimensions of innovation capability. The findings suggest that SMEs operating in turbulent transition economies can achieve more innovation and best performance by leveraging their intangible, highly valuable, and rare talent resources.