This study examines how high-performance work systems (HPWS) enhance innovation performance through dynamic capabilities (DCs), conceptualized as learning, integration, and reconfiguration capabilities. Addressing a gap in prior research, the study treats DCs as distinct dimensions and investigates their mediating roles in the HPWS–innovation performance relationship, while also exploring the moderating effect of coaching leadership. Drawing upon the Resource-Based View (RBV) and Social Exchange Theory (SET), the study develops and tests a moderated mediation model to examine the impact of coaching leadership on innovation performance through the indirect effect of HPWS via Dynamic capabilities (DCs). This study followed a quantitative approach collecting data from 340 employees in the IT sector using structured questionnaires and validated scales, and hypotheses were tested using Hayes’ PROCESS Macro (Model 7). The findings reveal that HPWS have a significant positive effect on innovation performance and significantly enhance all three DC dimensions, which in turn positively influence innovation performance and mediate the HPWS–innovation relationship. Coaching leadership significantly moderates the relationship between HPWS and both learning and integration capabilities, but not reconfiguration capability, resulting in partial support for moderation. The study contributes to strategic HRM and dynamic capability literature by offering an integrated moderated mediation framework and provides practical insights for organizations seeking to enhance innovation performance through HR systems, dynamic capabilities and leadership practices.