This paper presents the study of a critical social element in an organisation, namely "climate for innovation", whose role has been claimed to influence the diffusion of innovation. The paper argues that there are three main factors constituting the climate for innovation: organisational culture, leadership, and team climate. To study the roles of these factors, a questionnaire survey targeting design professionals employed in Australian architecture and engineering design (AED) organisations was conducted. Based on the sample of 181 respondents, results from the structural equation modelling showed that organisational culture for innovation significantly influences the level of innovation diffusion which in turn contributes to business performance. Consistent with other previous research, this finding indicates that organisations wishing to strengthen their capability and performance via the use of innovation should ensure that an innovation-conducive culture prevails, and is valued by all members of the organisations. Such a culture provides a condition for innovation to be effectively diffused: a desired outcome that contributes to firm's performance and competitiveness.