Performance and innovation measurement systems: The mediating role of organizational agility

Abstract

The objective of this study was to examine the mediating role of organizational agility in the relationship between the performance measurement system (PMS) and different types of innovation: incremental, radical, and ambidextrous, within the manufacturing industry. The relationship between PMS and innovation has attracted increasing attention in the literature, particularly regarding dynamic capabilities that help explain the development of innovations. In this context, organizational agility is particularly relevant for understanding the PMS–innovation relationship, as both reflect and foster the organizational capabilities that drive innovation. This research demonstrates that the use of interactive PMS and organizational agility are critical determinants of innovation and organizational success in business environment characterized by rapid change and intense competition. A survey was conducted with 221 manufacturing organizations exhibiting high level of innovation and the data were analyzed using partial least squares structural equation modeling. The results reveal positive associations between the use of interactive PMS and incremental and ambidextrous innovations. Furthermore, they indicate that organizational agility mediates the relationship between the interactive use of PMS and all three types of innovation—incremental, radical, and ambidextrous. From a theoretical perspective, by focusing on organizational agility as a mediating mechanism between the use of interactive PMS and innovative outcomes, an area that has received limited scholarly attention, this study contributes to the literature on management control systems. By identifying organizational agility as a key explanatory mechanism, the findings further demonstrate that the interactive use of PMS extends beyond its informational role, enhancing organizations’ ability to simultaneously pursue diverse innovation opportunities. The practical contributions suggest that the use of PMS promotes the continuous exchange of managerial information and organizational coordination, contributing to agile responses to the demands of the competitive environment and to innovative initiatives.