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Cumulative capability models are dominating frameworks explaining how manufacturing organizations gain their performance capabilities, such as quality, delivery, flexibility and cost. When innovation capabilities are excluded from the framework, the models are incapable of explaining how companies sustain substantive capabilities in a changing environment. Responding to this gap, the purpose of this paper is to propose and test a “sand cone” cumulative capability model that includes the innovation competitive performance alongside the competitive performance of quality, delivery flexibility and cost.

Two competing cumulative models were proposed. The extended cumulative capability model hypothesizes the development of innovation in sequence with other competitive performance dimensions. The affected with innovation cumulative model hypothesizes innovation performance as a predecessor of other performance dimensions. The models were tested using a multimethod approach on a representative sample of 500 manufacturing companies. An analysis of correlations among competitive performance, frequencies of plants following prescribed sequences, fit statistics of covariance-based structural equation modeling and analysis of strength and statistical significance of path coefficients enabled us to select a model that best represents the collected data.

The findings reveal that innovation competitive performance operates as a predecessor of quality, delivery, flexibility and cost and is developed in relation to these performance dimensions. The modified model also provides a theoretical explanation of how innovation performance helps to sustain reliable production systems that can perform consistently over time within a tolerable range of quality, delivery, flexibility and cost performance.

The results are significant for practitioners, especially for companies that are operating in volatile environments because the results provide insight on how to develop innovation competitive performance in relation to quality, delivery, flexibility and cost performance.

This study extends the cumulative capability models with innovation competitive performance. It advances the contingency approach on cumulative capability models.