The Influence of National Culture on Innovation
Authors:   , Ganguli Sumit , Tzabbar Daniel , Gefen David 
Published: September 2022

What is the relationship between the culture of innovation within a firm and its innovative outcomes? Does national culture impact the innovation index within a nation? How do the components of the country's innovation impact the economic value of its firms and the nation itself? I have used the following approach to answer these questions. 1) I conducted a firm-level survey on the impact of the culture of innovation on the novelty of innovation in developing countries like India and Israel, and in developed countries like the UK and the US. To disprove the Schumpeterian theory, I examined the moderating effect of the size of the firm and its revenue on the influence of a culture of innovation on innovative outcomes. 2) In addition, I examined the impact of Hofstede's cultural dimensions of national culture on the components of the Global Innovation Index for 53 countries, using the most recent dataset of 2021. 3) I also studied the impact of the components of nations' Innovation Indices, as measured by the Global Innovation Index, on the economic values of 10 nations in the technology sector. The results indicate a positive association between the culture of innovation and the novelty of innovation. In addition, the impact of the firm's size and revenue on the relationship between the culture of innovation and the novelty of innovation was insignificant. I also conducted two other studies. In the second study, I examined the relationship between six of Hofstede's cultural dimensions for 53 countries and the countries' Innovation Indices, as measured by the Global Innovation Index (GII). I was able to establish some relationships: i) Uncertainty avoidance has a negative relationship with market sophistication. ii) A long-term orientation has a positive relationship with market sophistication. iii) A long-term orientation and individualism have a positive relationship with institutions. iv) Individualism, a long-term orientation, and indulgence have a positive relationship with human capital and research. v) A long-term orientation and indulgence have a positive relationship with business sophistication. vi) Uncertainty avoidance has a negative relationship with business sophistication. vii) A long-term orientation and individualism have a positive relationship with knowledge and technology outputs. viii) Uncertainty avoidance has a negative relationship with knowledge and technology outputs. For the third study, I examined the relationships between the components of the Global Innovation Index and economic value. The results indicate that a nation needs a mature, diversified, competitive domestic market and industry, and a strong digital infrastructure to emerge as a nation with strong economic value in the information technology sector. The key drivers for economic growth in a nation are investments in research and development, and mature engineering and manufacturing processes. I believe this study of national culture and its impact on innovation and the relationship between a firm's culture of innovation and the novelty of innovation could improve innovative outputs from firms in developing countries like India and Israel and enhance their economic value.