New markets today are very different than markets just a few years ago. Competitive advantage comes from strategies and processes that allow organizations to react quickly to take advantage of evolving global markets. Central to this notion of keeping pace with changes in capital markets is the concept of innovation.; Innovation can encompass a new product, a new process, a new service for the customer, and/or create a new way of doing business. Innovation is invention that has produced economic value (Foster & Kaplan, 2001). According to Hamel (2000), the capacity to re-conceive existing business models in ways that create new value for customers, and produce new wealth will become the defining competitive advantage in this new economy.; There is currently little empirical literature to test the relationship between innovation and organizational effectiveness. Innovation is a complex and multifaceted construct. In addition, the literature is lacking any empirical evidence regarding ways to measure organizational capacity for innovation.; The purpose of this research study was to gain a greater understanding of the relationship between organizational capacity to innovate and market orientation necessary to sustain competitive advantage in this global economy. This study analyzed the reliability and validity of an instrument designed to assess organizational capacity for innovation. Participant data was obtained from confidential surveys conducted in a fast food company.; This study found that the Innovation Capability Audit (ICA) is a valid and reliable instrument for assessing organizational capacity for innovation. The factor analyses performed on the ICA revealed distinct dimensions of organizational drivers necessary to foster innovation. In addition, these findings support Berthod, Hulbert & Pitt's (1999) argument that innovation and market orientation interact in a “facilitative manner.”
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