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Social trust and corporate innovation: An informal institution perspective

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  • Lyu, Xiaoliang
  • Ma, Jiameng
  • Zhang, Xiaochen

Abstract

We examine the effect of social trust on corporate innovation. We find a positive relation between social trust and corporate innovation. This association survives a series of robustness checks concerning alternative measures, omitted variable issues, instrumental variable regressions, difference-in-differences tests, placebo tests, etc. We also identify that social trust promotes corporate innovation through the following three economic channels: motivating managers in the long term, mitigating financial constraints, and promoting cooperative culture. Moreover, we show the positive effect of social trust on a more comprehensive text-based measure of innovation (Bellstam et al., 2021) and that innovative business practices strengthen the association between social trust and innovation.

Suggested Citation

  • Lyu, Xiaoliang & Ma, Jiameng & Zhang, Xiaochen, 2023. "Social trust and corporate innovation: An informal institution perspective," The North American Journal of Economics and Finance, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:ecofin:v:64:y:2023:i:c:s1062940822001644
    DOI: 10.1016/j.najef.2022.101829
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    1. Wang, Haoyu & Zhang, Yan, 2024. "Social trust, audit quality and institutional investor herd behaviour," Finance Research Letters, Elsevier, vol. 63(C).

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    More about this item

    Keywords

    Social trust; Corporate innovation; Informal institution;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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