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This paper investigates which innovation capabilities are more important for driving technological and non-technological innovations and which of the two innovation types has the greatest impact on the financial performance of manufacturing companies.

Based on a theoretical model of four innovation capabilities – two technological: Technology Development Capability and Operations Capability, and two non-technological: Management Capability and Transaction Capability – a database of 1,331 Brazilian manufacturing companies was analyzed through partial least squares structural equation modelling (PLS-SEM).

The results indicate that technological capabilities (Technology Development and Operations) have a greater impact on technological innovation. However, both technological capabilities also affect non-technological innovation, with the Technology Development Capability being the most influential in this relationship. Results also indicate that non-technological capabilities (Management and Transaction) have a greater impact on non-technological innovation. Nevertheless, both non-technological capabilities also impact technological innovation, especially the Transaction Capability, which is the most influential in this relationship. Furthermore, it was identified that non-technological innovation has a more significant impact on financial performance than technological innovation, presenting a novel finding to the field of innovation in manufacturing.

This manuscript refutes prior discussions and opens new possibilities for the interconnection of dynamic and ordinary innovation capabilities in two different arrangements, each aimed at improving a specific type of innovation. A theoretical framework is proposed to highlight that, depending on the innovation type focused on, ordinary innovation capabilities can be more relevant than dynamic ones for innovation in the manufacturing sector. From these theoretical advancements, practitioners can understand that investments in non-technological resources, skills and routines can also boost technological innovation, as well as sales, profit and market share growth.

The purpose of this paper is to examine different types of organization of the firm considering the innovation capabilities of manufacturing firms.

The authors carried out an innovation survey with Brazilian manufacturing firms. A sample of 1,156 firms was analyzed in this paper. Collected data were analyzed using multivariate data analysis techniques. From an innovation capabilities approach, it was possible to identify different types of organization of the firm.

Results show four different types of organization of the firm: advanced, intermediate and basic stability-oriented and change-oriented. Each type presents a different innovation capabilities arrangement. The successful strategies toward innovation are related to change-oriented organization of the firm and advanced stability-oriented organization of the firm.

This study contributes to the literature by presenting a different view on the organization of the firm, encompassing the capabilities approach and thus a higher level on the perception of firms' heterogeneity. This study contributes to narrow the literature gap on how firms internally coordinate its different capabilities into a coherent organization to sustain an innovative behavior.

These straightforward findings can serve as a guideline so that managers can conduct changes within their companies toward more innovation. Managers can reconsider its organization as a way to foment innovation, once it is identified as a key strategy for competitiveness.

This study may help managers understand that focusing on stability-driven capabilities is riskier if change-driven capabilities are not present in an adequate and aligned level of development. The outcome may be the growth of the cost structure greater than the potential return. Conversely, managers should also understand that once change-driven capabilities are in a glance, they need do follow up with stability-driven capabilities. Here, the risk is not having an adequate structure to sustain the upcoming growth, arising from innovation. In short, not only “cost and value” should be taken together, but they must be arranged following the specific situation of the company. Every company should manage costs either to sustain new added value or to allow the addition of new value.

The study is based on a unique dataset that traces a large set of companies, being able to check different types of firm organization and associate it with innovation capabilities. The study relates to an emerging economy, which has not received adequate attention until now, largely because of the lack of micro-level data. The study is based on a robust theoretical model of innovation capabilities, which is being tested through such data. Finally, results elucidate ways to improve innovation performance of firms.