Innovation in Firms Across Nations

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 have proposed many theories about the drivers of innovation covering the role of government policy and country level labor, capital and culture. In contrast to those theories, the authors theorize why in the current global environment, the internal culture of a firm may be the most important driver of innovation. They test their theory on survey and archival data from 759 firms across 17 major economies of the world. Results suggest that: 1) among the factors studied, the internal culture of a firm is the strongest driver of radical innovation across nations, and 2) the commercialization of radical innovations translates into a firm’s financial performance; it is a stronger predictor of financial performance than other popular measures such as patents. The authors discuss the implications of these findings for research and practice.