Innovation performance: The effect of knowledge-based dynamic capabilities in cross-country innovation ecosystems

•Innovation performance creates competitive advantage for innovation ecosystems.•Knowledge-based dynamic capabilities (KBDC) are drivers of innovation performance.•KBDC consist of knowledge creation, -diffusion, -absorption and -impact.•Knowledge creation is the strongest predictor of innovation performance.•An innovation ecosystem framework centered around KBDC is proposed. This study operationalizes the knowledge-based dynamic capabilities (KBDC) that act as drivers of innovation performance in innovation ecosystems, across different market economies. Innovation ecosystems facilitate the flow of resources to transform ideas into reality. In turn, KBDC provide a means to create and share expertise, which contributes to the diversification of the economy, and allow businesses to reach beyond their own boundaries to create value for customers in new ways. Employing partial least squares path analysis, four constructs, namely knowledge creation, knowledge diffusion, knowledge absorption and knowledge impact, are comparatively analyzed. Across all four constructs, knowledge creation is the biggest driver of innovation performance, and the strongest predictor of innovation performance in developed and developing market economies. Knowledge absorption is the strongest predictor of innovation performance in transition economies. A KBDC-centered innovation ecosystem framework is proposed to highlight the innovation performance and competitive advantage inherent in each knowledge-related capability.