Aligning innovation with market characteristics in the nonprofit professional theater industry

In this study, the authors integrate theories of innovation diffusion, relational exchange behavior, and organizational learning to explain the roles of innovation, product exploration experience, promotion, and market sophistication in determining firm performance. They test the research questions using objective measures of financial performance from a sample of 124 firms in the nonprofit professional theater industry. The results suggest that the independent variables interact in systematic ways to influence firm performance across two different customer segments: relational and transactional. The findings lend empirical support to two theoretical perspectives that have received little prior empirical examination: (1) Innovation performance is determined by characteristics of the overall marketplace and target market segments, and (2) product exploration experience enhances organizational learning and performance.