The impact of quality of IS information and budget slack on innovation performance

Previous literature has differing opinions on the relationship between budget slack and innovation performance. Proponents of budget slack argue that it permits companies to experiment with new strategies and innovative projects in a more resourced environment. Opponents counter that budget slack promotes undisciplined and diminished incentives to innovation performance. Our study finds the relationship between budget slack and innovation performance to be an inverse, U-shaped curve. Too little budget slack is as bad for innovation performance as too much budget slack is. This result settles the debate in the previous literature. Next, the positive effect of the quality of information system (IS) information on innovation performance may vary in different budget environments. The findings of this study support our expectation that the quality of IS information has a positive and significant influence on innovation performance when the level of budget slack is low, but has no significant effect when the level of budget slack is high. In a less resourced environment, the IS system is required to capture and reflect the information that managers require for the more effective operation of innovation processes. (C) 2009 Elsevier Ltd. All rights reserved.