The role of innovation capability on fashion industry as an intervening variableAyesha SaleemMSBA-17-11INTRODUCTION:For the development and progress of any country fashion industry plays a vital and important role. Fashion industry is playing a crucial role in the economy growth of Pakistan. No doubt it is the large sector to play its role for country. Discussing about art, clothing, fashion is hard but not of clothing. But influence of clothing is much more important when we discuss about fashion. Fashion industry has grown by leaps and bounds in last 15 to 20 years. To achieve high ratio and increased we can attained this by innovation capabilities. Researches of the view that implementation of innovation capabilities is a main vehicle for any firm adaption and change to improve firm performance especially under these conditions. Research work on fashion industry is little or no and its implementation in accordance with the innovation capabilities which will directly relate with the performance of the firms. Innovation capability is the ability to develop new products according to markets demands (Adler, shenbar, 1990). In this paper role of innovation capabilities on performance of SMES as intervening variable is present. First objective of this study to find out the role of innovation on performance of fashion industry. Innovation is a major driver of business growth and expansion because it allows firms to transform their dynamic capabilities to become more adaptive and develop the ability to learn and explore new ideas given that every firm possess a bundle of resources skills and competencies as argued by the resource-based theory of firms(Peres, Muller, Mahajan, 2010). Innovation capabilities play a role on fashion industry as an intervening variable. The study conducted by (TSAI and TSAI, 2010) concludes that the management and technological innovation capability significantly and positively affect performance on financial aspects, internal business process learning and growth. Moreover researcher (LEE and HSICH, 2010) concludes that entrepreneurship positively affects the innovation capabilities.The importance of variables or testing factors which are dependant of innovation capabilities and in the same way factors of the increment of the performance. The research problem in this study is how to improve innovation capabilities to increase and positive effect on performance. How the role of innovation capabilities as an intervening variable are justified. What are those variables? Impact of variables on the performance.In this study detail explanation of role of innovation capabilities in the performance as an intervening variable with the help of past articles and past researchers work and their result. To justify the role of innovation capabilities variable are taken in account are business innovation capabilities, entrepreneur competencies, and quality managementChapter 2:Literature Review:SMEs are considered as the vehicle of economic growth. Innovation that are equipped with entrepreneur competencies perform better than the others. In this literature review the detailed discussion regarding the three variables of innovation capabilities has been discussed in detail. High innovation reveals positive impact over business performance of SMEs. Innovation is an important organizational capability because the success of new product is the engine of growth which give impact on sales, profits and power of competition for many organizations (Battor, Battor, 2010, sivadas, Dwyer, 2000). Innovationess refers to firm capacity to engage in innovation: that is introduction of new processes, product or ideas in the organization (Hult et al, 2003). This capacity to innovate is among the most important factor influencing performance (Hurly and Hult, 1998, Porter, 1990). Rapidly changing business environment because of innovation and cycle of product encourage the requirement to be creative by growing new thoughts items, and forms, and to adopt the fast change (Rhee, J. ,Park, T & Lee, D. H. 2010). Expanded competition and worldwide rivalry enhances the requirement for a business to be competitive by becoming innovation (Rubera, G., Kirca, A.H, 2010). Entrepreneur’s demographic characteristics, attitudinal behavioral, managerial and technical competencies are often cited as the most influential factors related to the performance of small and medium sized enterprises (Manilav and Chan, 2002, Nooretal, 2010). Innovation offers a principle source of sustained competitive advantage, research into the relationship between quality management and innovation performance remains scarce (Flynn 1994, Prajogo and Sotal 2003, Sing and Smith 2003). Entrepreneurial competencies are comprised of entrepreneur motives, traits, self image, attitude, behavior, skills, and knowledge (Boyatzis, 1982, Brophyand Kiely 2002).H1:Innovation Capabilities will have positive effect on PerformanceBusiness Innovation Capabilities:(Filippetti, 2010) acknowledged that the innovation is the broad concept that includes the new methods in business practices and new marketing concept , work, organizational or external relation and also include implementation of new or it may be improved product either it is good ,service, or process. Innovation of people’s characteristics is one type of innovation that can be develop and trained. (Hult et al. 2014)stated that determinant that influence an organization’s capability to manage innovation capabilities is one of definition to describe innovation. According to researcher (Silva et al. 2010) there are many factors to determine innovation capabilities that vary from firm to another firm. (Lawson and Samson 2010) ability of firm by applying new ideas and continuous knowledge to new product, process and system for the benefit of their stake holders and firm itself in the deep definition of innovation capability so according to these studies following hypothesis have been formulated in lieu of conceptual framework and base paper.H2: Business innovation capabilities will have positive effect on performanceEntrepreneurial Competencies:Worldwide increasing business creating value and enhanced contributions through innovation use of marketing tool and other important factors such as skills, knowledge, behavior and potential value and most significant opportunities for having competitive advantage to remain in industry. (Sanchez 2012) To enhance people performance and effectiveness at working place, the most important point that has to be focus on is competenciesFor the development and performance entreprewneur competencies become one of the important factors in order to succeed in modern economy because development of an entrepreneurial mindset affect by this. (Mitchelmore and Rowley 2013) stated that there are four groups of competencies that can improve business performance and growth which is personal and relationship business management and human relation competencies. (Man et al 2002) stated that to perform a job role succesfuly an entrepreneurial competency is the total ability of the entrepreneur. This will lead to draw a hypothesis is thatH3:Entrepreneurial competencies will have positive impact on performanceQuality Management:Quality management at management process that endorse the belief that management process must focus on integrating the customer-driven quality throughout on organization, (Stah, 2002) it emphasize and stated that continuous improvement of product quality and service delivery also taking in account the reality that to achieve this goal, employee relation needs to be quality addresses, as the customer cannot get the satisfactory service delivery from ill motivated employee. (Lewis, 2004) Implementation of quality strategy is to see organizational customers and client as the vital key to organizational success. Organization using QM as a innovation variables use their business through the eyes of their customers and clients and then measure there organizational performance in lieu of customer and client expectation (Fran,2002)Successful organizations with the implementation of QM as an intervening variable of innovation through the eyes of its customers by strengthen and exploring all avenues including employees, make up the desired performance(Stah 2002). According to (Hng and Morris 2002) various components of quality management when effectively harnessed will result in customer satisfaction and hence competitive advantage and therefore Performance. According to this Hypothesis have been formulated mentioned below:H4: Quality Management will have positive impact on PerformanceTherefore it is fundamental to apply both a one dimensional and a multi dimensional construct to deal with innovation capabilities to comprehend whether every individual variable of innovation capability and also general innovation is influencing business performance or not. In the same context, the hypothetical commitment of this research concentrates on three variables of innovation capabilities.This study ought to investigate that up to what extent individual variable of innovation capability have a positive impact on performance by fashion industry especially in media sector. The arguments rose in this study regarding the importance of business innovation capability, entrepreneur competencies, and quality management support the argument of resource based view (Werner felt, B. 1984)The main focus of this study to find the individual impact of three variables of innovation capabilities namely: Business innovation capability, Entrepreneur Competencies, Quality management. Therefore this study contributes to the literature by employing three variables of innovation capabilities separately in increasing performance and hence economyChapter 3Methodology Research methodology covers the methodology followed by the researchers to conduct research (Zikmund, W., Babin, B.,Carr, J., and Griffin, M. 2010)Research methodology covers the frame work of the study along with the research design. The framework that has been proposed on this study support conceptual framework to link the independent variables that have been selected to the dependant variables on the basis of reviewed literature regarding the role of innovation capabilities on the performance of fashion industry.The framework mentioned below has been proposed on the basis of base paper INNOVATION CAPABILITY OF SMES THROUGH ENTREPRENEURSHIP, MARKETING CAPABILITY, RELATIONAL CAPITAL AND EMPOWERMENT and the reviewed literature.