The mediating role of innovation on the influence of industry structure and national context on firm performance

In this study, a model of industry structure and national context is developed and tested to better understand their influence on firm investment in innovation and performance. Archival financial data from 730 companies in 30 countries and 10 industries, along with industry- and national-level data, was collected to test the mediation model and hypotheses. The results of the analyses provide support that both industry structure and national context play an important role influencing firm investment in innovation and performance. In particular, industry dynamism and a country's patent protection were found to be positively related to firm performance. These relationships were mediated by the firm's investment in innovation. The findings of this study support the need to include both industry and national effects in international strategy research. Additionally, the role that information technology (IT) has on these variables, through the globalization issues of coordination, communication, and competition, is explored.