How innovation willingness influences the public organizational performance relationship: Developments in how stakeholders (external organizational factors) and internal management affect performance

A model of organizational performance requires attention to two main constructs, the external environment and the internal organization. External (environmental) as well as internal (organizational) factors have a definite impact on organizational performance. In addition, innovation is an important function of management because it may be linked to organizational performance. Therefore, incorporating an organizational innovation construct in the context of linking internal/external organizational factors and organizational performance would provide a significant contribution to understanding public organization performance on both theoretical and practical grounds. In line with this reasoning, the purpose of this study is to investigate how internal/external organizational factors and innovation engage, if at all, in affecting organizational performance. To this end, this study examines the direct causality assumption that management variables (internal organizational factors) and stakeholder-relations (external organizational factors) influence organizational performance and then explores how the internal/external organizational factors affect the willingness to innovate en route to influencing organizational performance.; Survey questionnaires were administered to directors and program managers in local human service agencies and a total of 262 responses were identified as valid for empirical testing. Eight latent variables were included in the structural equation modeling. Structural equation modeling analysis results first point towards the importance of management matters (internal organizational factors) and stakeholder-relations (external organizational factors) to organizational performance. The results then highlight the mediating role that innovation plays in the management-stakeholders-performance relationship.; The major findings suggest that innovation willingness is the most important variable in this study. It has positive direct impact on organizational performance and significant mediating impact on organizational performance. Rational culture is an important predictor for innovation willingness. Hierarchical culture had a negative significant impact on innovation willingness and organizational performance. Decentralization of decision-making has positive impact on innovation willingness and organizational performance. Political support has an important positive predictor for innovation willingness and organizational performance. Although rational culture doesn't have direct impact on organizational performance, it has significant positive indirect impact on organizational performance.; This research concludes that that organizational innovation is likely to he a solid facilitator for organizational performance; it is likely to be a mediator of internal/external management factors that affect organizational performance. In turn, innovation willingness is supported by a good quality of internal management practice and external stakeholders support. Knowledge about this mediating effect provides a more complete understanding of how internal/external management factors relate to organizational performance. Therefore, the incorporation of the organizational innovation construct in the context of linking internal/external organizational factors and organizational performance provides a significant contribution to understanding public agency performance.