Investigating the Impact of Differentiation Strategy on Firm Performance: A Mediator View Based on Innovation

Abstract

This research explores the relationship between differentiation strategy and firm performance, considering innovation as a potential mediator. Drawing upon strategic management literature and innovation theory, the study investigates how firms implementing a differentiation strategy leverage innovation to enhance their performance outcomes. Through a quantitative research design, the study examines data collected from a sample of firms across industries to assess the extent to which innovation acts as a mediator in the relationship between differentiation strategy and firm performance metrics such as profitability, market share, and growth. Utilizing mediation analysis techniques, the research aims to elucidate the mechanisms through which differentiation strategy influences innovation activities within firms, and subsequently, how innovation drives improvements in firm performance. The findings contribute to a deeper understanding of the strategic pathways through which firms achieve competitive advantage and sustainable growth by effectively leveraging differentiation strategies and fostering a culture of innovation. Moreover, the research offers practical insights for managers and decision-makers seeking to optimize their firm's strategic positioning and innovation management practices to enhance performance outcomes in dynamic and competitive markets.