The effect of organizational learning on firm performance: the mediating role of innovation capability in Ethiopian state-owned enterprises

This study examines how the process of organizational learning (OL) enhances firm performance (FMP) and is mediated by innovation capability (IC) within five selected state-owned enterprises (SOEs) in Ethiopia: Ethiopian Airlines, Ethio Telecom, Commercial Bank of Ethiopia, Ethiopian Shipping and Logistics Services, and Ethiopian Electric Utility. An explanatory research design was adopted, utilizing structural equation modeling (SEM) to assess direct, indirect, and mediating effects. The results indicate that OL has a significant positive effect on firm performance (FMP) (β = 0.279, p < 0.01) and IC (β = 0.517, p < 0.01), with IC playing a crucial mediating role in the relationship between OL and FMP (β = 0.35, p < 0.01). Additionally, IC positively influences FMP (β = 0.677, p < 0.01). This study contributes to the existing body of knowledge by integrating OL and IC, offering valuable insights into their influence on the performance of SOEs in emerging economies. Key recommendations include institutionalizing structured OL frameworks, strengthening leadership commitment, and fostering an environment conducive to knowledge-sharing and continuous learning. Furthermore, SOEs are advised to implement multidimensional innovation strategies encompassing technological advancement, process optimization, organizational restructuring, and sustainable development practices. Additionally, establishing ongoing monitoring and evaluation mechanisms is essential to ensure long-term competitiveness.