The relationship between innovation and firm performance has been uncertain. In previous empirical tests of both causal directions of the organizational performance and innovation relationship, the temporal sequence of research designs has often been flawed. We meta-analytically test both temporal sequences of this relationship using 158 effect sizes from 55 empirical studies. We find that many empirical studies hypothesized one temporal sequence (e.g. innovation and future performance), but used data based on the opposite temporal sequence (e.g. past performance and innovation). Correcting the studies based on the actual temporal sequence used reveals that while the relationship between innovation and future performance is positive (based on economic rent-seeking), the relationship between past performance and innovation is less clear, especially when the study's framing is taken into account. Focusing on temporal sequencing suggests new research avenues on the organizational performance and innovation relationship.
- Temporal sequence