Innovation capability and firm competitiveness in Ethiopian industrial parks: The moderating role of human capital

Abstract

This research examines the innovation capability and firm competitiveness in Ethiopian industrial parks. Extant empirical literature has demonstrated the crucial role of innovation capability for competitiveness. However, only a few studies have examined the interplay between human capital and innovation capacity in terms of the competitive performance of firms. To this end, this study examines how innovation capability in Ethiopian industrial parks affects firm competitiveness by considering the moderating role of human capital. By adopting a quantitative approach, cross-sectional survey data was collected from 81 active manufacturing firms by targeting firm managers. Partial least squares structural equation modeling (PLS-SEM) using SmartPLS 4 was employed to analyze the data and test the study hypotheses. The results reveal that human capital does not moderate the relationship between innovation capability and firm competitiveness but rather partially mediates it. The findings highlighted that the development of firm human capital quality—creativity and innovative skills—is essential for enhanced firm innovation capacity and competitiveness. Therefore, firms aspiring to develop their competitiveness—operational capability, dynamic capability, and market performance—need to focus not only on developing innovation capacity but also on developing their human capital competencies for innovation. The study helps organizations develop effective innovation capacity development strategies to ensure greater firm competitiveness.