Vijayanthi, W.A.U.Weerakoon, W.M.P.G.C.2021-08-122021-08-12201122359877http://www.erepo.lib.uwu.ac.lk/bitstream/handle/123456789/6912/227-Identification%20of%20Relationships%20between%20Firm%20Traits%20and.pdf?sequence=1&isAllowed=yNote: See the PDF Version According to Joseph Schumpeter (1950) the concept of "Creative Destruction" emphasizes that the introduction of new and better ways, products and services makes the previous ways, products and services obsolete. Consequently, the role of innovation appreciated as a key driver of the economic growth. In the organizational context, innovations may be associated with performance and growth through improvements in efficiency, productivity, competitive positioning, etc. All the organizations have to be capable of introducing innovations regardless of being technological firms or not. The term innovation refers to a new way of doing something. It may refer to incremental, radical, and innovative changes in thinking, products, processes, or organizations. Innovations are typically adding value to the existing operation of the business and create a positive impact towards the organization. The work environment of the firm, motivation towards innovation, experience of the business, number of and skills of employees of the business and all other financial and non-financial factors affect the ability of generating innovations. Researchers have argued on the relevance of various firm traits to innovative efforts and associated performance. Frequently considered firm traits include degree of diversification (Pascoe,1987), and Research and Development (R&D) ( Dujowich, 2007), Age of the firm, extent of local ownership, firm size, share of export in sales, type of ownership (Lee, 2004), firm turnover (Elj, 2009), firm size, ownership, R&D activities, patent (Hanel, 2002). According to Schumpeter (1942), large firms had become the drivers of the innovation in the US economy. In addition, capacity of a firm to be profitable from innovation might depend on its size and he claimed that large firms are more likely to innovate than small fi rms. This research supplemented the limited pool of current literature on firm traits and innovation potential in Sri Lankan context. Accordingly, the objectives of this study were to identify relationship between firm traits and innovation potential and to identify most critical factor which determines the innovation potential in Software industry in Sri Lanka.enInformation ScienceComputing and Information ScienceMechanical EngineeringOther