RESEARCH ARTICLE Flourishing organizational innovation through psychological capital and organizational culture: An empirical examination Aastha Tripathi 1 | Swati Dhir 2 1 School of Management and Labour Studies, Tata Institute of Social Sciences, Mumbai, Maharashtra, India 2 Department of OB/HR, International Management Institute New Delhi, New Delhi, India Correspondence Aastha Tripathi, School of Management and Labour Studies, Tata Institute of Social Sciences, VN Purav Marg, Deonar, Chembur, Mumbai, Maharashtra 400088, India. Email: aasthatripathi315@gmail.com The present study intends to investigate the relative significance of psychological capital (Psycap) and organizational culture in predicting organizational innovation (OI). Using social cognitive and conservation of resources theories, the present research was undertaken with a sample of 527 managerial executives employed by diverse Indian firms. Self-reporting questionnaires were distributed to respondents using the method of purposive sampling. To evaluate the structured model, a domi- nance analysis and partial least squares structural equation modeling (PLS-SEM) were conducted. The analysis revealed that Psycap positively and significantly relates to OI. Moreover, the results suggest the relevance of organizational culture in fostering creativity within employees and thus facilitating OI accordingly. The result pinpoints that Psycap and organizational culture can enhance OI. Organizations can plan the necessary interventions that enhance Psycap and facilitate the creation of a healthy organizational culture, which can lead to OI. This study provides novel insights by revealing the overlooked roles of Psycap and organizational culture in managing OI. KEYWORDS hope, optimism, organizational culture, organizational innovation, psychological capital, resilience, self-efficacy 1 | INTRODUCTION In today's dynamic business environment, organizational adaptation is no longer a choice but a necessity for survival and prosperity. This imperative has spurred a surge in innovative activities within organiza- tions. One key driver of this trend is the strategic application of behavioral design principles (Mao et al., 2021; Sweetman et al., 2010). Within a dynamic business landscape, continual innovation serves as a critical driver of competitive advantage (Ortt & Duin, 2008). Lumpkin and Dess (1996) described innovation as one's participation in new ideas via a creative perspective to solve problems and match the demands of the market. On the other hand, organizational innovation (OI) is influenced by its capital structure and how it is managed (Mohanty, 2009). Social capital, human capital, and psychological capi- tal (Psycap) have surpassed their traditional economic counterparts as the most important forms of capital today (Jafri, 2012). Many papers in the literature have focused on Psycap, which fosters OI by creating a favorable environment (Rego et al., 2012; Yan et al., 2020). According to Larson and Luthans (2006), the four dimensions of Psycap—“resilience, hope, optimism, and self-efficacy”—constitute factors that promote originality and innovativeness in their daily activ- ities. Resilience is a process that increases an individual's patience in difficult situations (Rajabi et al., 2023; Ran et al., 2020). A positive energy, hope, on the other hand, increases an individual's motivation and compatibility (Piazza et al., 1991). Moreover, Seligman et al. (2005) defined optimism as an emotional and cognitive component that makes good things more important than bad things. Finally, self- efficacy, as described by Luthans and Avey (2011), is confidence in one's own capabilities to achieve desired outcomes. They found that Psycap provides the necessary support for enhancing creativity and innovation. As a result, identifying individuals' Psycap is regarded as a vital factor for promoting innovation. Building on the importance of Psycap, organizational culture also plays a critical role in fostering innovation within organizations (Khazanchi et al., 2007; Tripathi et al., 2021). Previous research defines organizational culture broadly as “a set of shared values, Received: 27 May 2023 Revised: 23 May 2024 Accepted: 22 June 2024 DOI: 10.1002/pa.2939 J Public Affairs. 2024;24:e2939. wileyonlinelibrary.com/journal/pa © 2024 John Wiley & Sons Ltd. 1 of 15 https://doi.org/10.1002/pa.2939