ABSTRACT
Innovation capability of firm is identified as one of the major factors for the enhancement of performance of firm (Deshpande, Farley, andWebster 1993; Edwards and Delbridge 2001; Yam et al. 2004). Normally, these capabilities of firm are focused on product and process innovations, which may be incremental or radical. The meaning and impact of these innovations changes based on the type of firm. So, firms within cluster are need to possess technological and innovation capabilities. It is unlikely to find all these capabilities in the same firm and they do not innovate in isolation by focusing on in-house R&D, but involves other firms as a part of innovation process. Thus, literature highlights functional, process and strategic approach to accommodate capabilities. The relationship between innovation and firm performance has been explored in many studies as shown in Table 1.
