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Homophily inertia and innovative activity: cross-country firm-level evidence

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  • Rajeev K. Goel
  • Michael A. Nelson

Abstract

Using firm-level data on thousands of firms worldwide, this paper examines the influence of historic homophilic networks on innovation. Historical precedents can be deemed as facilitating latent homophily within the broad considerations of multidimensional homophily. Another contribution of this work lies in comparing the different influences of homophily on process versus product innovations. Results show that cultural ties that facilitate autonomous behavior are conducive to innovation, as are historical colonial links of nations. However, the somewhat broader cultural globalization undermines innovation, likely due to greater knowledge spillovers. Among firm-level factors, firms conducting R&D, manufacturing firms, firms’ locations in nations’ capital cities, and those maintaining their own websites were more likely to innovate, while the age of firms did not seem to matter. On the other hand, sole proprietorships revealed the propensity for process innovations to be different from product innovations. Besides the insights into the effects of innovation effects of firm characteristics, the main insight seems to be that not all dimensions of cultural homophily similarly impact innovation.

Suggested Citation

  • Rajeev K. Goel & Michael A. Nelson, 2026. "Homophily inertia and innovative activity: cross-country firm-level evidence," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 35(5), pages 835-855, July.
    • Handle: RePEc:taf:ecinnt:v:35:y:2026:i:5:p:835-855
    DOI: 10.1080/10438599.2025.2536608
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