Innovation and Trust: Social Trust As an Important Contextual Determinant of Innovation Output. A Cross-country Analysis

Simon Winkel Madsen

Student thesis: Master thesis


The ability to innovate is crucial driver of firm competitiveness (Schumpeter, 1934; Cho & Pucik, 2004; Hult et al, 2004) and the economic development of nations (Romer, 1986; Hasan & Tucci, 2010). This makes innovation an important topic of international business and politics and understanding the contextual determinants of innovation a key issue in both fields. Still, the understanding of which national contextual factors that determine innovation remains somewhat undertheorized (Hult et al., 2004). One such possible determinant of innovative capacity is generalized trust. Over the last two decades, national levels of generalized trust have proved to be a great explanatory variable for important societal factors such as economic growth (Algan & Cahuc, 2014), corruption (Uslaner, 2012) , happiness and life satisfaction (Bjørnskov, 2011) and more. In this thesis I propose the existence of a causal relationship going from national levels of generalized trust to innovation output. This hypothesis is based on a theoretical framework, in which I also present five mechanisms by which this proposed causality would work. The empirical results from my quantitative cross-country analysis are favorable to the hypothesized relationship, albeit causality cannot be concluded. The implications for further research are wide and potentially open up for a new understanding of what determines innovation, as well as for how trust is linked to economic performance.

EducationsMSc in International Business and Politics, (Graduate Programme) Final Thesis
Publication date2016
Number of pages68