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Do Dimensions of Innovation Drive Market Cap? Using AI to Identify Dimensions of Innovation in Top Management’s Communication

Innovation is critical for firms' growth and success. One published theory suggests six dimensions of a culture of innovation – incentives for innovation, champions of innovation, internal competition, willingness to cannibalize successful products, focus on the future, and risk embracement – as drivers of innovation. But that theory has not been formally tested. Culture is a soft, ambiguous factor compared to other drivers discussed in the literature, such as firm size, country of origin, or R&D investments, and it is relatively difficult to measure. We use generative AI models to text-analyze top management’s communications to stakeholders to detect the presence of the six dimensions of innovation. We then correlate the presence of these dimensions to firms’ market cap. Preliminary results show that the dimensions of culture of innovation are a promising discriminant of success vs failure of firms. In particular, incentives for innovation and champions of innovation emerge as key dimensions.