This paper examines the role of intra-firm competition as a strategic mechanism for enhancing innovation performance, emphasizing the contingent conditions that determine its effectiveness. By developing a theoretical framework grounded in contingency theory, the paper identifies market volatility, slack resources, and procedural justice climate as key factors shaping the impact of intra-firm competition on the innovation performance of internal teams. The theoretical framework highlights that while intra-firm competition can accelerate experimentation, challenge organizational inertia, and drive creative problem-solving, its benefits are not universal. Instead, its effectiveness is contingent on external market conditions, the strategic configuration of high organizational slack and distinct team problem domains, and employees’ perceptions of fairness in competition. This paper contributes to the literature on innovation management and competitive strategy by clarifying the enabling conditions for productive intra-firm competition, resolving prior conflicting perspectives, and providing a structured framework for future empirical investigation. The paper underscores the need for deliberate managerial design and calibration of competitive structures, ensuring that internal competition fosters sustainable innovation rather than inefficiencies or counterproductive rivalry.
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