The effect of intellectual property rights on firm performance in service firms: the role of process and organizational innovation

Purpose This paper aims to examine the effects of intellectual property rights (IPRs) on firm performance, considering the mediating effect of process innovation and the moderating effect of organizational innovation. Additionally, this study investigates both the direct and indirect effects of IPRs on firm performance. Design/methodology/approach We employed partial least squares structural equation modeling (PLS-SEM) to examine proposed hypotheses. Our analysis attempted to analyze 3,750 Korean firms sourced from the Science and Technology Policy Research Institute (STEPI). Findings Process innovation mediates the relationship between IPRs and firm performance, and organizational innovation moderates the relationship between IPRs and process innovation. As a result, process and organizational innovation positively and indirectly affect firms’ financial performance. Also, IPRs can be regarded as a crucial resource for service firms, contributing to enhancing their performance. Research limitations/implications The results of this study imply that IPRs can act as valuable intellectual resources for firms, improving financial performance. The mediating role of process innovation in the relationship between IPRs and firm performance highlights the significance of process innovation as a principal resource applicable to both the service and the manufacturing industries. Additionally, this study reveals that organizational innovation plays a vital role in determining firm performance by moderating the relationship between IPRs and process innovation. For the limitation of this study, it is important to acknowledge that the research primarily focuses on examining firms’ internal resources, while innovation activities can be significantly influenced by external knowledge resources as well. To address this limitation, future research should consider integrating the influence of external knowledge resources to provide a more well-rounded perspective on the relationship between IPRs, innovation, and firm performance. Practical implications This study holds two significant practical implications. First, from a corporate management perspective, service firms can improve their financial performance by developing or improving process innovations. This underscores the importance of investing in and fostering process innovation within an organization to achieve better financial outcomes. Second, from the corporate managers’ perspective, organizational innovation is crucial in improving firm performance, particularly when combined with IPRs and process innovation. This suggests that a holistic approach to innovation, encompassing both organizational and process-oriented initiatives, can lead to more substantial positive effects on firm performance. Finally, managers should proactively manage and regulate IPRs at various organizational levels, especially in the rapidly evolving digital landscape. By safeguarding and strategically leveraging their IPRs, companies can position themselves advantageously and capitalize on the opportunities presented in the digital realm. Originality/value This study shows that firm innovations can dynamically shape the relationship between IPRs and firms’ performance. This highlights the significant potential for firms to leverage their intellectual resources strategically to create novel and competitive products or services. Adopting a resource-based view, this study suggests that firms can enhance their competitive advantage and overall performance by effectively utilizing and collaborating with IPRs and innovations.