Employees' innovative ability is one of the most important instruments for companies in order to achieve competitive performance. Understanding how this process works can help companies to perform more efficiently to achieve this goal. The current study considers how innovative ability of employees can lead to problem identification, and further, to new idea generation. Doing this helps companies to improve competitive performance. Despite this research considers more on hotel industry, however understanding this process can help managers in other fields to involve ideas of their employees in decision making. This leads to be more effective and accurate in the process of achieving competitive performance in their businesses.