Improvement of Hospital Performance Through Innovation Toward the Value of Hospital Care Casimiro Dias, MPH; Ana Escoval, PhD The perspective of innovation as the strategic lever of organizational performance has been widespread in the hospital sector. While public value of innovation can be significant, it is not evident that innovation always ends up in higher levels of performance. Within this context, the purpose of the article was to critically analyze the relationship between innovation and perfor- mance, taking into account the specificities of the hospital sector. This article pulls together pri- mary data on organizational flexibility, innovation, and performance from 95 hospitals in Portugal, collected through a survey, data from interviews to hospital administration boards, and a panel of 15 experts. The diversity of data sources allowed for triangulation. The article uses mixed methods to explore the relationship between innovation and performance in the hospital sector in Portugal. The relationship between innovation and performance is analyzed through cluster analysis, supplemented with content analysis of interviews and the technical nominal group. The main findings reveal that the cluster of efficient innovators has twice the level of performance than other clusters. Organizational flexibility and external cooperation are the 2 major factors explaining these differences. The article identifies various organizational strategies to use innovation in order to enhance hospital performance. Overall, it proposes the alignment of perspectives of different stakeholders on the value proposition of hospital services, the embeddedness of information loops, and continuous adjustments toward high-value services. Key words: hospitals, health care organizations, integrated delivery systems, technology adoption T HE HOSPITAL SECTOR in Portugal and Europe is currently facing evolving needs and expectations from service users against a backdrop of fiscal austerity. 1 A renewed fo- cus on innovation reflects an emerging view of hospitals as an important source of new ideas, both for the creation of innovation within the health sector and in the interface with other sectors. It is noted that innovation in the hospital sector can act as a stimulus for innovation across the economy, through the provision of technological infrastructure, reg- ulations, and other framework conditions. 2 ‘‘Innovation’’ is the leading theme of the European Union economic strategy to 2020. 3 It proposes a ‘‘knowledge based economy’’ through research and innovation for sustain- able development. However, while looking at the scale and scope of innovation in the health sector, it is important to avoid the ‘‘proinno- vation bias.’’ This is based on the assumption that any innovation is generally good for orga- nizations and society. Within this context, there is an increasing focus on the so-called European Paradox, referring to the assumed fact that Europe is strong in science but re- mains weak in innovation. 4,5 However, these apparent paradoxes might emanate from a narrow understanding of inno- vation. In fact, previous evidence shows that investments in science and technology, with- out organizational changes, have a limited The Health Care Manager Volume 32, Number 3, pp. 268–279 Copyright # 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins Author Affiliations: Health Systems and Public Health, World Health Organization, Copenhagen, Denmark (Mr Dias); and National School of Public Health, University Nova Lisboa, Lisbon, Portugal (Dr Escoval). The authors have no conflicts of interest. Correspondence: Casimiro Dias, MPH, World Health Organization, Regional Office for Europe, Division of Health Systems and Public Health, 8 Scherfigsvej, DK-2100 Copenhagen Ø, Denmark (diasc@who.int). DOI: 10.1097/HCM.0b013e31828ef60a 268 Copyright © 2013 Wolters Kluwer Health | Lippincott Williams & Wilkins. Unauthorized reproduction of this article is prohibited.