We are in it together: Communitarianism and the performance-innovation relationship✰

The relationship between firm performance and innovation behavior has been widely studied, yet theoretical empirical findings still diverge. We investigate this inconsistency through the lens of informal institutions, specifically communitarianism, degee to which group goals are considered more important than individual goals. do an analysis a firm-level dataset covering 31,860 firms across 56 countries. find evidence for ‘cushion effect’, where in highly communitarian settings benefit from insurance order engage activity when their is below aspirational value. Firms experiencing above value also likely due ‘pay-it-forward’ mechanism, using activities contribute community challenges. Both effects conditional on being sufficiently embedded direct business environment. discuss wider implications literature performance-innovation provide guidance policy makers practitioners.