Competition among firms is getting harder due to globalization, deregulation, the dynamics of user needs, and new technologies. In order to survive and improve growth, firms must continuously create innovation. Innovation is defined as an economically and socially successful introduction of a new way or a new combination of existing ways in transforming inputs into outputs that result in changes in the value/price relationship offered to the users (de Meyer and Garg, 2005; Fontana, 2011). Innovation can be done not only in product innovation, but also in other forms such as process innovations, innovation in business model, organizational structure, brand, marketing, management systems, customer service and experience (Davila, Epstein and Shelton, 2006; Trott, 2008; Fontana 2011; Keeley, Pikkel, Quinn and Walters, 2013). Innovation considered as the main strategic tools to have a competitive advantage in today’s dynamic environment. But in practice, not all firms can succeed in innovation. Based on the research conducted by Center for Innovation and Collaboration (CIC), PPM Management (2013), it is reported that 24.6% of firm respondents did not continue their innovation activities. That number increased in 2014 to 26.5% (CIC PPM Management, 2014). Results of the study revealed that one of the sources of innovation failure associated with their human resources competencies. Human resources have strategic value that must be taken into account (De Saa-Perez and Garcia-Falon, 2002). Good quality of human resources will determine the performance of innovation (Jimenez-Jimenez and Sanz-Valle, 2005; Koc, 2007; Wichitchanya and Durongwatana, 2012). Furthermore, Gomez-Mejía et al (2007) and Snell and Bohlander (2010) suggested in order to have qualified human resources, firms need to develop effective human resources policies and activities. According to Millmore, Lewis, Saunders, Thornhill and Morrow (2007), to achieve optimum results, human resource management should be conducted strategically. It should always be associated with the company’s strategy (Snell and Bohlander, 2010; Leopold and Harris, 2009). The need for strategic human resources management is also explained by Lengnick-Hall, Lengnick-Hall, Andrade and Drake (2009) and Pourkiani, Salajeghe and Ranjbar (2011). Furthermore, strategic human resources management is expected to increase innovation (Wang and Zang, 2005; Chen and Huang, 2009; Pourkiani, et al,2011). The main objective of this study was to investigate the influence of strategic human resource management for the firm’s innovation capabilities that will also indirectly affect the firm performance. The context of this study was the software which has been given the characteristics associated with the changing dynamics of knowledge and high technology, short product life cycles, and high levels of global competition that demands continuous innovation.