What Drives Innovation in Firms Across Nations? A Culture of Innovation

Abstract

Radical innovation is an important driver of the growth, success, and wealth of firms and nations. Because of its importance, authors in a variety of disciplines and time periods have addressed this topic. They have proposed many hypotheses about the drivers of innovation in firms across nations, including factors such as religion, geography, number of scientists and engineers, country culture, intellectual property protection, patents, R&D, and firm culture. The authors test these hypotheses using survey and archival data across 759 firms drawn from 17 major world economies. Results contradict many prior assertions about the appropriate metric for innovation and the drivers of innovation.Results show that: 1) Commercialization of radical innovations has an important impact on a firm's financial performance and as such is a more valid measure of innovation than patents. 2) The internal culture of a firm is the strongest driver of radical innovations. Its impact exceeds that of all other factors proposed in the literature.