Product innovation and firm performance: does the technology capacity of a firm matter?

Purpose Technological innovation and development have increasingly become crucial for the survival and growth of enterprises. Although the impact of innovation on performance and the relationship between technological development and performance have been investigated, the interrelationship between the three components has been neglected. The purpose of this paper is to investigate the moderating role of technological capability in product innovation and firm performance in the context of the Vietnamese economy. Design/methodology/approach By using the Generalized Method of Moments (GMM) regression and the xtpcse regression analysis method to address data errors in the time series model, this study uses panel data from 218 listed companies on the Vietnam stock market from 2015 to 2022. Findings The findings suggest that companies innovating their products can enhance firm performance. However, companies with high technological capability may have a negative impact on firm performance and moderate the impact of product innovation on firm performance. Specifically, technological capabilities weaken the effect of product innovation on firm performance. Further analysis by dividing the sample into two groups based on high and low Return on Assets reveals that the moderating variable TECHCAP holds similar significance. Research limitations/implications This study was conducted using data from companies listed on the Vietnam stock market, which may not be fully representative of all firms in the Vietnamese economy. The second limitation comes from differences in recording and disclosing financial information related to product innovation costs specified in Vietnamese Accounting Standards compared to other countries. This leads to some difficulties in collecting data, reporting results and making objective comparisons with studies around the world. Practical implications The findings of this research provide valuable insights for managers in formulating short-term and long-term business strategies. The results also serve as a reference for potential investors in making effective investment decisions. Originality/value This study contributes to the literature by highlighting the complex relationship between technological capability, product innovation and firm performance. It offers a novel understanding of how technological capabilities can moderate the benefits of product innovation, providing a nuanced perspective for both scholars and practitioners.