Correlation between innovation and performance of construction firms

This paper studies the performance of 118 major Korean construction companies between 1997 and 2003 to verify empirically the existence of a direct relationship between innovations of firms and their performance. This time period was selected because there had been a radical change in the market leadership of the construction industry due to the Asian Financial Crisis of the late 1990s. The AMOS analysis and the research demonstrated that innovation of a firm has an indirect relationship with its performance through mediating variables - firm product and process fits. While innovations of a firm are contingent to the external factors, product fit and process fit have direct impact on firm performance, suggesting that the product fit and the process fit are two significant indicators of the success or failure of a firm.