Innovation Capabilities and Firm Performance: A Meta-analysis of the Schumpeter’s Hypothesis

Abstract

Prior empirical evidence on the relationship between innovation capabilities and firm performance remains inconsistent, leaving unresolved questions regarding the magnitude of this association and the conditions under which it varies. This study addresses this gap by conducting a cross-national meta-analysis of 54 independent samples from 19 countries (N = 320,529). Grounded in Schumpeter’s hypothesis that innovation is a primary driver of economic growth, we distinguish between the Mark I. pattern (characterized by creative destruction) and the Mark II. pattern (characterized by creative accumulation). In support of Schumpeter’s hypothesis, our findings indicate that, on average, innovation capabilities exhibit a positive, small-to-moderate, and statistically significant association with firm performance. When decomposing Schumpeter’s hypothesis into its ‘narrow’ forms, the relationship is strongest for Mark I. and for studies combining both Mark I. and Mark II. patterns, whereas evidence for the Mark II. pattern alone suggests no meaningful performance effect. Additional analyses show that heterogeneity across studies is partly explained by contextual and methodological moderators, including the proximity of capability measures to performance outcomes, performance indicators, and study design characteristics. By synthesizing a broad base of empirical evidence and identifying the conditions under which innovation capabilities are associated with firm performance, this study provides a more precise and generalizable understanding of the innovation capabilities–firm performance relationship and strengthens the empirical foundations of the Schumpeterian framework.