Journal of Business Research 88 (2018) 306–313

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Journal of Business Research

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Cultural change and innovation performance T

⁎
Pantelis C. Kostis, Kyriaki I. Kafka, Panagiotis E. Petrakis
Department of Economics, National and Kapodistrian University of Athens, Greece

A R T I C L E I N F O A B S T R A C T

Keywords: Major forces seem to have led to cultural background change in the form of incremental change or shock over the
Innovation last three decades. The fact that certain cultural changes are occurring and that these changes are embodied in
culture social behavior and thus in economic decisions raises the question of whether cultural change affects innovation
social capital performance. The relationship between cultural change and innovation performance was explored using an
cultural change
unbalanced panel of decade-level data for 34 OECD countries between 1980 and 2010. Analysis using fixed-
panel data
effects estimation, different intercepts across countries, and decade time dummies shows that the overall
measure of culture is positively related to innovation. Furthermore, exploring the effect of the dimensions of
civic culture on innovation shows that the positive effect of culture on innovation stems from the positive effect
of trust, control, work ethic and honesty, while obedience negatively affects innovation.

1. Introduction of a sample of 34 OECD countries over three decades, using a broad

Scholars have expressed great concern that technological progress
might decelerate in the near future (Rodrik, 2013) because of a
dwindling stream of basic inventions (Gordon, 2012) and educational
and knowledge burdens. Even critics of these hypotheses (Brynjolfsson
& McAfee, 2014) acknowledge the considerable challenges facing high-
income economies (Petrakis, Kostis, & Kafka, 2016).
The effect of cultural background on these challenges may prove
critical. Culture and economics are two of the most powerful forces that
shape human behavior (Throsby, 2001) and thereby economic activity.
Economic development is affected by traits that have been passed from
generation to generation through fundamental factors that are rooted in
history (Spolaore & Wacziarg, 2013). These traits define the cultural
background of each society. Cultural evolution is a set of processes
(Richerson & Boyd, 2005), and the cultural transmission process in-
volves psychology and communication. Certain theorists also affirm
that cultural background affects innovation performance (Leal-
Rodriguez, Ariza-Montes, Roldan, & Leal-Millan, 2014; Petrakis, Kostis,
& Valsamis, 2015; Thomson, 2009).
In this paper, we recognize the relationship between cultural
background and innovation performance and acknowledge the emer-
gence of certain cultural changes that are embodied in social behavior
and thus in economic decisions. Accordingly, we address the following
question: Does cultural change affect innovation performance? We
identify the effects of cultural change on innovation performance over a
long period. The empirical evidence presented here is based on analysis
definition of cultural background.
This study addresses some major challenges mentioned in the lit-
erature regarding the effects of culture on innovation performance.
Although numerous scholars have studied whether cultural background
affects innovation, most empirical studies have used cross-country data
to investigate the effects of cultural background on economic outcomes
(Alesina & Giuliano, 2015; Gorodonichencko & Roland, 2010, 2015;
Guiso, Sapienza, & Zingales, 2006). Thus, most studies have considered
cultural traits as enduring properties because cultural values are stable
over time. Accordingly, these studies have employed a static conception
of cultural background derived from, for example, Hofstede's (1980,
Hofstede et al., 2010) cultural traits, the GLOBE study (House, Hanges,
Javidan, Dorfman, & Gupta, 2004), or questionnaires for specific case
studies. Thus, the principal contribution of this paper is to present
analysis of a long period of panel data on cultural background and in-
novation performance over the last three decades. Furthermore,
whereas most empirical studies have focused on specific cultural traits
such as time orientation, trust, and uncertainty avoidance, we adopted
a broader definition of cultural background, as well as specific cultural
traits, thereby contributing to the literature.
According to the literature, changes in cultural background can only
be slow moving (De Jong, 2009; Johnston, 1996; Schwartz, 2009).
However, certain behaviors that are closely linked to society's cultural
background change in the short term or medium term. These rapid
changes occur in response to external conditions or cultural shocks,
during which certain values of the cultural background may change

⁎
Corresponding author.
E-mail addresses: pkostis@econ.uoa.gr (P.C. Kostis), kkafka@econ.uoa.gr (K.I. Kafka), ppetrak@econ.uoa.gr (P.E. Petrakis).

https://doi.org/10.1016/j.jbusres.2017.12.010
Received 19 June 2017; Received in revised form 5 December 2017; Accepted 6 December 2017
Available online 28 December 2017
0148-2963/ © 2017 Elsevier Inc. All rights reserved.
P.C. Kostis et al.
rapidly (in the medium or even short term if it is a question of survival).
In recent decades, examples of such conditions include globalization,
migration, aging societies, and the 2008 global financial crisis (GFC).
The use of a dataset spanning three decades is therefore valuable to
understand the effects of cultural background change on innovation
outcomes.
The structure of the article is as follows: Section 2 discusses cultural
background change and key conditions that have led to cultural back-
ground change over the last three decades. Section 3 provides a lit-
erature review on the effects of cultural background on innovation
performance. Section 4 discusses the most appropriate measures re-
garding innovation outputs. Section 5 presents the data and method
used in the empirical analysis. Section 6 presents the empirical results.
Lastly, Section 7 presents the discussion and conclusions.
2. Cultural background change
Under normal circumstances, cultural values remain constant over
time because the conditions that affect cultural background also remain
relatively unchanged (De Jong, 2009; Petrakis & Kostis, 2013, 2014).
Cultural values are thought to be affected only in the long run or the
very long run. The principal sources of external influence that shape
cultural background are the available resources, climate, and geo-
graphical features (Diamond, 1999; McClelland, 1961; Petrakis, 2014;
Triandis, 2009), which change very gradually.
However, cultural change may also derive from human psychology
or social and ecological factors (Boyd & Richerson, 2005). When in-
dividuals are exposed to conditions and behaviors that differ from the
behaviors that are accepted in their cultural background, they follow a
process of cultural eclecticism (Peterson, 1992; Peterson & Kern, 1996),
whereby they accept and adopt certain behaviors, reject others, and
partially adopt others. It should also be noted that cultural change is
often cumulative (Boyd, Richerson, & Henrich, 2011; Caldwell,
Atkinson, & Renner, 2016; Caldwell & Millen, 2008). After each change,
much is added and little is lost. Moreover, changes to the cultural
background usually lead to the need for further changes to complement
or supplement the original change (Dressler & Carns, 1969). Thus, a
critical question is whether any conditions or factors besides the cul-
tural background may have affected human psychology and behaviors
in recent decades at the global level.
One factor that has led to cultural change in recent decades is glo-
balization. Globalization is an inevitable process in both developed and
developing economies. Through globalization, different cultures have
influenced each other over the last few decades. The literature contains
two conflicting schools of thought regarding the impact of globaliza-
tion. The first school of thought, based on modernization theory
(Inglehart & Baker, 2000), is that globalization contributes to the
convergence of differences between cultural backgrounds because po-
litical and social forces effect changes in cultural values. Through glo-
balization, a grid of cultural values is created. This grid is based on
common features across different societies interacting with local cul-
tures, ultimately leading to a cultural transformation with strong co-
hesion among cultural backgrounds (Hermans & Kempen, 1998). The
second school of thought (DiMaggio, 1994) emphasizes the stability
and endurance of traditional values against economic and political
changes that take place under globalization. According to this school of
thought, these traditional values are able to resist change because they
are independent of any economic changes.
Along with globalization, population migration has grown rapidly.
The adaptation and integration of immigrants into a new culture is a
complex process that requires immigrants to undergo a period of ad-
justment, which can last one or two decades or even longer (Chiswick &
Miller, 2005; Zorlu & Hartog, 2005). Socio-cultural adaptation has been
cited as a major factor of intercultural adjustment (Ward & Kennedy,
1992) because it consists principally of behavioral and cognitive com-
ponents of cultural learning for performing effectively in a new milieu.
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Journal of Business Research 88 (2018) 306–313
The assimilation of immigrants in the new host environment is directly
related to the concept of culture shock (Oberg, 1960). Individuals who
have just entered a new society are unable to understand the ideology
and behavior of the members of the society and do not know how to
behave (Xia, 2009). These individuals suffer, heavily or partially, from
symptoms such as depression, anxiety, and feelings of helplessness
(Mio, 1999). As these symptoms are magnified, the process of learning
and adapting to the new cultural background becomes ever more dif-
ficult. Generally, migration leads to individualism because it often re-
sults in detachment from the group and survival based on private efforts
(Petrakis, 2014). An immigrant who fails to adjust properly to the new
cultural background may become alienated from society, and this
alienation will lead to psychological confusion and emotional dis-
comfort (Hess, 1994).
Cultural change in recent decades can also be attributed to popu-
lation aging, which has led to incremental change in the cultural
background of different societies. Population aging is a global demo-
graphic trend that applies to all regions and countries at various levels
of development. Particularly in recent decades, massive technological
advances have been accompanied by decreasing mortality, higher child
survival rates, and increasing longevity because of better nutrition,
sanitation, medicine, health care, and so forth. This shift has led to a
rapid increase in the number of people aged over 60 years old (United
Nations, 2017). The largest differences in individuals' personality
emerge during adolescence (Borghans, Duckworth, Heckman, & Baster,
2008). Over the years, people become more and more socially domi-
nant, conscientious, and emotionally stable (Roberts, Walton, &
Viechtbauer, 2006). At the same time, higher savings for pensions may
reduce capital investments (McMorrow & Roeger, 1999). The elderly
are more oriented to the present and seem to care less about the future
and long-term developments. Social levels of vitality and openness to
experience rise early in life and then fall in old age (Roberts et al.,
2006). The above changes in cultural background are gradual, so they
can be characterized as incremental.
Changes in cultural background following an external shock are
particularly important too. It is commonly observed that financial crises
such as the Stock Market Crash of 1929 or the 2008 global financial
crisis tend to produce or accelerate cultural changes. Indeed, if changes
are accepted during a crisis, they tend to remain even after the crisis has
subsided (Dressler & Carns, 1969). Thus, as well as affecting the
economy, a financial crisis seems to affect society and, more specifi-
cally, the cultural values and personality traits of the members of that
society (Magee, Miller, & Heaven, 2013). For instance, the global fi-
nancial crisis of 2008 is likely to have caused considerable stress and
hardship for many individuals (Eschbach, Parker, & Stoeberl, 2001;
Sargent-Cox, Butterworth, & Anstey, 2011), as did the 1929 crisis,
which affected investment and saving behaviors (Petrakis, 2011).
Changes of this type can affect individuals' psychological adjustment to
new conditions and, depending on the intensity of the change, can be a
shock to individuals' cultural values. Cultural background changes due
to financial crises therefore usually occur faster than incremental
changes do.
3. Cultural effects on innovation
Undoubtedly, an economy's innovation activity depends directly on
the macroeconomic conditions (Petrakis et al., 2015). As well as de-
pending on the macroeconomic conditions, however, differences among
countries in terms of levels of technological development and invest-
ment capacity largely stem from the society's dominant cultural back-
ground (Leal-Rodriguez et al., 2014; Petrakis, 2014; Ulijn & Weggeman,
2001; Westwood & Low, 2003).
A significant requirement for societies and economies to move to-
ward innovative activities is a more favorable environment (culture)
that promotes the free exchange of ideas among members of society.
The grid of values in a society plays a special role in motivating and
P.C. Kostis et al.
encouraging its members to innovate (Petrakis et al., 2015, 2016).
Because innovation is a complex process that involves learning and
developing new ideas, culture is integral to innovation (Jaskyte &
Dressler, 2004). As Petrakis et al. (2015) noted, an effective way of
keeping enterprises and organizations competitive is by developing an
entrepreneurial culture that boosts innovative activity and thus main-
tains competitive advantage. Thus, culture should be considered a
strategic instrument for achieving competitive advantage through in-
novation. Culture encourages innovation and creativity and motivates
individuals or groups to foster the spirit of entrepreneurship.
Although recent findings provide considerable empirical insight into
technological regimes and their impact on economic growth, we know
little about the specific channels through which innovation is integrated
into societies. Cultural background is a key factor that determines in-
novation via two channels (Petrakis et al., 2015): 1) social learning
(Bandura, 1971), which is a dynamic process that transmits cultural
characteristics from one generation to the next; and 2) organizational
structure, which facilitates more efficient governance structures and
favors innovation and the development of competitive advantage.
These channels sometimes prevent and sometimes enhance the diffu-
sion of innovations.
Two studies have examined the relationships between several spe-
cific cultural values and innovation outcomes. Low uncertainty avoid-
ance and low power distance societies have higher growth rates and a
stronger tendency for innovation (Hofstede, 1980). Willingness to take
entrepreneurial risk, long-term planning, and acceptance of change are
key cultural traits that boost innovation (Rothwell & Wissema, 1986).
Societies that reward creativity and encourage their members to
achieve personal progress tend to achieve better innovation perfor-
mance (Petrakis, 2014). Furthermore, the freer individuals are to ex-
press their opinions, the more opportunities they enjoy to explore new
ideas (Barnett, 1953). Thus, weak cohesion between members of in-
dividualistic societies makes dissemination of information easier than
in collectivist societies, whose members use information at the inter-
group level, hampering its dissemination (Shane, 1992). In contrast,
numerous cultural barriers may act to restrict the innovation output
(Leal-Rodriguez et al., 2014).
4. Proxies for innovation output
Difficulties in defining and measuring innovation mean that proxies
are typically used in the literature to measure innovation (Hall, 2011;
Smith, 2005). Examples include the number of patent applications,
R&D expenditure, technology improvements expenditure, innovation-
related training expenditure, and number of citations and trademark
applications. All of these proxies have drawbacks (see Allen, 1983;
Moser, 2012; Thomson, 2009).
Based on the assumption that the key output measure of innovation
activity is the success of the firm (Rogers, 1998), we can use variables
that reflect firm success to proxy innovation output. The best proxies for
firm success include profits, revenue growth, share performance,
market capitalization, and labor productivity. Using such indicators has
some drawbacks because these indicators may be affected by factors
other than innovation (Gow & Kells, 1998; Rogers, 1998). However,
innovations are considered an approximation of productivity (Burda &
Wyplosz, 2009; Iwaisako & Futagami, 2013; Jones, 2002).
For instance, according to Jorgenson's (2011) new framework for
productivity measurement, which is based on the insights of Schultz
(1962), innovation accounts for most of the growth in U.S. agricultural
output and the output growth in the highly IT-intensive computer in-
dustry. Seeking empirical evidence of the relationship between in-
novation and productivity, Hall (2011) found that product innovation
had an economically significant effect on revenue productivity and that
process innovation had an ambiguous effect because process innovation
is difficult to quantify. Aghion, Blundell, Griffith, Howitt, and Prantl
(2009) focused on the change of innovation and labor productivity,
308
Journal of Business Research 88 (2018) 306–313
finding that foreign firm entry in technologically advanced UK sectors
spurs both innovation and productivity growth, whereas entry by such
firms in lagging sectors reduces innovation and productivity growth by
domestic firms in those sectors.
5. Data description and methodology
To explore the relationship between culture and innovation, we
used an unbalanced panel of decade-level data for OECD countries
between 1980 and 2010. The final sample of countries and the period
under study were determined by the availability of innovation perfor-
mance data in the OECD database and the cultural variables in Buetzer,
Jordan, and Stracca's (2013) dataset. The final dataset consisted of an
unbalanced panel of 34 OECD countries over three decades. The
countries were Australia, Austria, Belgium, Canada, Chile, Czech Re-
public, Denmark, Estonia, Finland, France, Germany, Greece, Hungary,
Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, the
Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic,
Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom,
and the United States. To examine the effects of culture on innovation,
we used the following baseline estimation equation:
Innit = ai + β cultureit + γ Zit + λt + uit , (1)
where i denotes the OECD country (Nmax = 34) and t denotes the
decade (Tmax = 3). The dependent variable Inn is the measure for in-
novation, defined as the labor productivity growth; culture is a measure
of cultural background; Z is a vector of macroeconomic and institu-
tional control variables; αi is a set of country-specific fixed effects,
capturing the influence of unobserved country-specific time-invariant
heterogeneity; and λt is a set of time dummies for each decade in the
sample, controlling for decade-specific effects that are common to all
countries.
Panel data estimation was applied to Eq. 1. We employed the fixed
effects (FE) estimation approach, which allows for individual hetero-
geneity using different intercepts across countries and can be estimated
using ordinary least squares. We also included decade time dummies to
control for time-specific effects that were common to all countries.
The data were drawn from several sources. The majority of the
dataset was gathered from Buetzer et al.'s (2013) dataset, which con-
tains aggregated decade-level data for cultural variables and several
macroeconomic control variables. These data are based on survey data
from the World Values Survey (WVS) and the European Values Study
(EVS). To measure culture, we used the overall civic culture measure,
which emerged as the first principal component of the alternative traits
of a society's civic culture (culture) after principal component analysis
had been performed. As a robustness test, we also included seven al-
ternative cultural variables covering various dimensions of civic cul-
ture: interpersonal trust, control, work ethic, obedience, competition affinity,
prospensity to save, and honesty (Buetzer et al., 2013).
The data for innovation were gathered from the OECD Productivity
Database. These data refer to the average growth rate of GDP per hour
worked in constant prices for each decade and for each country (Inn).
This proxy for innovation output was the best available proxy for the
period under study. Following previous studies on the impact of culture
on the macroeconomy (Bjornskov & Meon, 2015; Buetzer et al., 2013;
Knack & Keefer, 1997), we included a vector, Z, comprising several
macroeconomic and institutional control variables: real GDP per capita
(gdp), as a measure of income; trade openness (open); human capital
(hcap); government expenditure (gov); inflation (inf); and quality of
government (qog), as a measure of institutional quality. The main
source for the control variables was Buetzer et al. (2013), except from
the trade openness data, which were taken from the Penn World Table
(PWT) dataset. Table 1 presents descriptive statistics for the variables in
the analysis.
The matrix of correlations between the overall measure of culture
and the seven alternative cultural dimensions shows that overall culture
P.C. Kostis et al. Journal of Business Research 88 (2018) 306–313

Table 1 6. Empirical results

Descriptive statistics.
Building on previous cross-country studies exploring the impact of
Mean SD Min Max N
culture on macroeconomic variables, we adopted a panel approach to
Culture 0.000 1.770 − 4.517 4.182 65 investigate the relationship between culture and innovation. We now
discuss the estimation of alternative specifications of Eq. 1 for the panel
Trust 3.490 1.405 0.884 7.016 86
of the 34 OECD countries over the last three decades.
Control 6.928 0.595 5.080 8.012 84
Work ethic −0.069 1.023 − 2.188 1.932 86 Table 2 shows the results for a baseline version of the specification
Obedience −0.240 1.019 − 2.344 1.581 86 of Eq. 1 with no control variables. The data in Table 2 provide evidence
Competition affinity −0.079 0.907 − 1.966 2.742 67 of the relationship between culture (as well as the seven traits of cul-
Propensity to save 0.329 0.113 0.094 0.634 86 tural background) and innovation. The two-way fixed effects method
Honesty −0.021 1.213 − 5.441 1.770 86
was used to allow for both country- and decade-specific effects that
Inn 2.091 1.313 − 0.014 7.611 83 capture unobserved effects across countries and over time. We extended
the regression specification by adding real per capita GDP as the main
Gdp 9.973 0.514 8.446 11.189 99 control in our specification.
Inf 1.744 0.752 − 0.323 3.904 98
Consistent with previous cross-country studies (Bjornskov & Meon,
Gov 2.947 0.206 2.431 3.290 53
Open 4.199 0.524 2.919 5.663 98 2015; Kaasa, 2016), the coefficient of the overall measure of culture
Hcap 2.870 0.357 1.781 3.573 100 was positive and statistically significant, highlighting culture's positive
Qog 0.831 0.153 0.476 1.000 91 association with innovation. Exploring the impact of the dimensions of
civic culture on innovation showed that all cultural measures had the
expected sign, although only control, work ethic, obedience and hon-
was positively correlated with trust (+0.84), control (+0.64), work
esty were statistically significant. This finding indicates that the posi-
ethic (+0.81), and honesty (+ 0.66) and negatively correlated with
tive effect of culture on innovation stems from the effect of control,
obedience (−0.75), competition affinity (− 0.45) and propensity to
work ethic and honesty. Obedience, in contrast, negatively affected
save (−0.35).
innovation. This finding was to be expected because obedience was
strongly negatively correlated with the overall culture measure. After
adding real GDP per capita as the main control variable, we confirmed

Table 2
Culture and innovation (alternative dimensions of culture).

Culture Trust Control Work ethic Obedience Competition affinity Prospensity to save Honesty Gdp Ν R2 F-stat

(1) 1.163 57 0.605 16.85

(3.54)
(2) 0.067 76 0.343 10.47
(0.21)
⁎⁎
(3) 1.343 74 0.414 13.77
(2.28)
(4) 0.444⁎⁎ 76 0.424 14.74
(2.38)
(5) − 0.908 76 0.441 15.81
(− 2.66)
(6) 0.141 59 0.401 7.70
(0.42)
(7) − 3.686 76 0.383 12.45
(−1.62)
(8) −0.202 76 0.356 11.06
(− 0.91)
⁎⁎
(9) 0.703 1.348 0.039 − 0.962 −0.250 − 4.771 1.204 57 0.783 7.24
(1.41) (2.17) (0.03) (− 1.31) (− 0.69) (−1.21) (2.92)
(10) 1.019 − 1.478 57 0.614 11.18
(2.64) (−0.73)
(11) 0.189 − 3.021 76 0.458 11.01
(0.61) (−2.88)
(12) 1.626 − 3.252 74 0.558 16.00
(3.11) (−3.52)
⁎⁎
(13) 0.364 − 2.484 76 0.506 13.35
(2.05) (−2.55)
(14) − 0.660⁎ − 2.183⁎⁎ 76 0.499 12.98
(− 1.90) (−2.13)
(15) 0.203 − 4.319⁎⁎ 59 0.512 7.69
(0.66) (−2.23)
(16) − 1.825 − 2.544⁎⁎ 76 0.462 11.17
(−0.80) (−2.39)
(17) −0.112 − 2.749 76 0.457 10.96
(− 0.54) (−2.70)
(18) 0.902⁎ 1.172⁎ 0.351 − 0.461 −0.041 − 5.856 1.126 − 2.581 57 0.807 7.01
(1.78) (1.90) (0.31) (− 0.58) (− 0.11) (−1.50) (2.78) (−1.37)

Notes: “N” – number of observations; t-statistics in parentheses. All estimates were carried out using the fixed-effects method allowing for both country- and decade-specific effects with
cluster-robust standard errors; each row presents a separate regression.
⁎
Denotes 10% significance level.
⁎⁎
Denotes 5% significance level.

309
 P.C. Kostis et al.

Table 3
Culture and innovation (robustness using different control variables).

Culture Trust Control Work ethic Obedience Competition affinity Prospensity to save Honesty Gdp Inf Gov Open Hcap Qog Ν R2 F-stat

(1) 1.065⁎⁎ − 0.974 1.191⁎⁎ 9.626 44 0841 13.76

(2.47) (− 0.58) (2.40) (3.79)
(2) 1.256 − 1.012 0.824 6.671⁎⁎ 1.384 40 0.869 11.08
(3.06) (− 0.56) (1.62) (2.38) (0.44)
(3) 1.213⁎⁎ − 0.915 0.909 7.215⁎⁎ 0.729 1.621 40 0.871 8.74
(2.75) (− 0.48) (1.60) (2.25) (0.42) (0.48)
(4) 0.185 − 3.019 1.628 − 1.437 76 0.507 7.63
(0.60) (− 2.94) (1.33) (−1.47)
(5) 1.787 − 3.307 2.452⁎⁎ − 1.090 74 0.624 11.98
(3.51) (− 3.78) (2.25) (−1.27)
(6) 0.566 − 2.299 3.292 − 1.439⁎ 76 0.609 11.55
(3.18) (− 2.58) (2.77) (−1.66)

310
⁎⁎
(7) − 0.720 − 2.129⁎⁎ 2.182⁎ − 1.084 76 0.554 9.22
(−2.08) (− 2.14) (1.86) (−1.16)
(8) 0.144 − 4.229⁎⁎ 1.971 − 1.053 59 0.534 4.59
(0.44) (− 2.12) (0.95) (−0.48)
(9) − 0.643 − 2.736 1.674 − 1.299 76 0.540 7.52
(−0.27) (− 2.59) (1.35) (−1.29)
(10) − 0.153 − 2.722 1.806 − 1.416 76 0.510 7.71
(− 0.75) (− 2.74) (1.49) (−1.46)
⁎⁎ ⁎
(11) 1.173 1.069 − 0.024 − 0.756 − 0.065 − 5.974 1.361 − 2.864 1.100 − 3.459⁎⁎ 57 0.854 6.92
(2.37) (1.84) (−0.02) (−0.98) (−0.18) (−1.59) (3.36) (− 1.62) (0.72) (−2.03)

Notes: “N” – number of observations; t-statistics in parentheses; respectively. All estimates were made using the fixed-effects method allowing for both country- and decade-specific effects with cluster-robust standard errors; each row presents a
separate regression.
⁎
Denotes 10% significance level.
⁎⁎
Denotes 5% significance levels.
Journal of Business Research 88 (2018) 306–313
P.C. Kostis et al.
the positive relationship between culture and innovation. The effect
was smaller than before real GDP per capita was added to the model but
still significant. This finding implies that the main channels for this link
are control and work ethic dimensions, whereas obedience still has a
significant negative effect on innovation. Furthemore, in regressions (9)
and (18) there seems to be a positive relationship between control,
honesty and trust to innovation.
To explore the sensitivity of our results, we included additional
control variables and developed alternative specifications for Eq. 1.
Table 3 shows the results of various specifications after we included the
vector Z, which contained additional control variables besides per ca-
pita GDP.
The positive effect of cultural background on innovation remained
stable across different control variables and alternative specifications.
The coefficient of the overall measure of culture had the expected sign
and was statistically significant in all specifications. The size of the
effect, however, was sensitive to the choice of control variable, ranging
from 1.065 to 1.256. We explored the effect of other cultural aspects on
innovation by adding control variables to the equation. In addition to
real GDP per capita, we added level of openness and a measure of
human capital. The results support the view that the main sources of
culture's positive effect on innovation are control and work ethic, while
the effect of obedience remains negative and significant. Furthermore,
regression (13) which examines the simultaneous effect of all seven
cultural traits confirms the strong positive effect of trust as well.
7. Discussion and conclusions
Countries have varying levels of technological development and
investment capacity because their cultural backgrounds differ. The grid
of values within a society either encourages or discourages members
from innovating. Over the last three decades, however, certain condi-
tions have led to cultural background change in the form of incremental
change or cultural shock. These cultural changes have consequently
altered countries' innovation performance.
This paper explores the relationship between cultural change and
innovation performance. We used an unbalanced panel of decade-level
data for 34 OECD countries between 1980 and 2010 to study this re-
lationship. Using fixed effects estimation, different intercepts across
countries, and decade time dummies, we found that the overall measure
of culture was positively associated with innovation. Furthermore, by
exploring the way the dimensions of civic culture affect innovation, we
observed that the effect of specific cultural values on innovation
stemmed from the positive effect of trust, control, work ethic and
honesty, whereas obedience negatively affected innovation. This ne-
gative effect was expected because obedience was strongly negatively
correlated with the overall cultural measure. Thus, we observed that
the overall cultural changes in the last three decades were implemented
correctly, acting as an enhancement rather than an impediment to in-
novation performance.
No general rule prescribes how to organize sustainable innovation,
so there is no “best” approach to innovation. Nevertheless, some policy
implications can be derived at the social level. Our findings are im-
portant for policymakers who need to enhance the innovation perfor-
mance of their economies. By understanding the effects of cultural
change on innovation, policymakers will be better equipped to confront
faltering innovation and will gain a clearer understanding of the role of
cultural background and behaviors in innovation.
Governments should establish procedures to collect, assess, and fi-
nance innovative ideas. Doing so will create the necessary conditions to
produce a culture of innovation. Governments should also implement
strategies that reduce cultural barriers. Suitable ideas may exist within
society, so to ensure that the opportunities arising from such ideas are
maximized, a system is needed to seek out, identify, assess, classify, and
focus on the most promising ideas and then implement these ideas. To
do so, teamwork is crucial, so mutual trust should be developed among
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Journal of Business Research 88 (2018) 306–313
members of society. Moreover, all members of society should be in-
spired because no other leadership competency influences productivity
and engagement more profoundly. When members of a society are in-
spired by a certain event or leader, they are more likely to expend
greater effort because of this additional incentive.
Incentives are also important. Incentives are essential for innovation
for the following reasons: 1) externalities arise from the public good
nature of information, which makes imitation easier than invention; 2)
information and knowledge are public goods in the sense that they are
non-rival in consumption and non-excludable, while information and
knowledge are inherently discrete; and 3) knowledge creation involves
tremendous uncertainty and risk (Belleflamme, 2006). By incentivizing
members of society, policymakers can achieve a more innovation-fo-
cused society. Carefully, successfully designed incentives motivate ci-
tizens to develop great innovations that generate massive economic
growth. Such incentives may include patents, prizes, and direct gov-
ernment funding and grants.
This study has some shortcomings. First, our empirical analysis
failed to reveal the factors that led to cultural background change,
explain the way the cultural background changed, or indicate the di-
rection in which change occurred in recent decades. At the theoretical
level, however, we focused on four basic factors, drawn from the lit-
erature, that do seem to have changed the cultural background of so-
cieties. Another limitation of our analysis is that we used a proxy for
innovation output because of the lack of availability of innovation
output data for the period under study. Nevertheless, most empirical
studies use proxies to measure innovation.
Future research could study whether the direction of cultural
change in recent decades has been for or against innovation perfor-
mance, focusing on other channels besides work organization. Possible
channels include investment behavior and the way entrepreneurs
choose sectors in which to invest and innovate. Furthermore, we hope
that better data collection methods in the coming years (e.g., the next
waves of the World Values Surveys and the European Social Surveys)
will help scholars enhance their research into cultural background
changes, thereby strengthening the validity of cultural data (Guiso
et al., 2006), especially in the wake of the 2008 global financial crisis.
Acknowledgement
The authors thank Dimitrios Bakas (College of Business Law & Social
Sciences, Nottingham Business School) for his overall help and Dionysis
G. Valsamis (Researcher, University of Athens, Department of
Economics) for reading and commenting on earlier drafts of the paper.
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Pantelis Kostis Researcher (PhD) in the National and Kapodistrian University of Athens.
Furthermore, since 2008, he joins the Research Committee of University of Athens
(Special Account of Research Grants), where he carries out programs of NSRF - UoA and
performs working papers, reference texts, analysis and reports of scientific content. He
has also served as trainer in courses for distance education training programs using in-
novative methods of distance education at the University of Athens, where he also carries
out development, course material processing, as well as data and material collection for
such programs. He is the author of one monograph -published by Springer regarding
European Economics and Politics in the midst of the crisis-, and many scientific articles
published in academic journals, like Journal of Business Research, Journal of Socio-
economics, Cyprus Economic Policy Review, Journal of the Knowledge Economy, and
others.
Kyriaki Kafka Researcher in the National and Kapodistrian University of Athens. Since
2015 she is working on her PhD thesis on the relative creditworthiness of economic
growth theory, in the doctoral program “UADPhilEcon” in the Department of Economics,
of the National and Kapodistrian University of Athens. Since 2011 she joins the Research
Committee of University of Athens, where she performs working papers, reference texts,
analysis and reports of scientific content, and she develops, edit and collect data and
material prepared for programs for supplementary education using innovative distance
education, in the Vocational Distance Training Center of the National and Kapodistrian
University of Athens (NKUA), where she has also served as trainer in courses for distance
education training programs using innovative methods. She is the author of scientific
articles published in academic journals, like Journal of Business Research, and Journal of
Innovation & Knowledge, and chapters of hers appear in many Edited Books.
Panagiotis E. Petrakis is Professor in the Department of Economics at National and
P.C. Kostis et al.
Kapodistrian University of Athens, Greece, where he serves as Director of the Sector of
International Economics and Development and Scientific Coordinator of Distance
Education Training Programs. He holds a degree in Economics from the University of
Athens, an MSc from the University of Sterling and doctorate from the University of
Athens. He was chairman of the Department of Economics at National and Kapodistrian
University of Athens the period 2005–2009. He is the author of numerous scientific ar-
ticles and monographs, and has extensive publications in recognized academic journals
313
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(Journal of Business Research, Small Business Economics, Journal of Banking and
Finance, Journal of Socio-Economics and International Entrepreneurship and
Management Journal) in a variety of disciplines including economic development, en-
trepreneurship and cultural background. He is the author of more than 26 monographs in
topics related to European and Greek growth, crisis, and economic policy. He is the au-
thor of a series of textbooks taught at Greek universities too. Furthermore, he has served
as a board member in scientific committees in the private and the public sector