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Trust and corporate R&D investment: Cross-country evidence

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  • Meng, Yijun
  • Wang, Xun
  • Zhang, Guoguo
  • Zheng, Shilin

Abstract

This paper examines the relation between societal trust and corporate innovation in the wider world. Using data on firms located in 72 countries and regions from 1992 to 2016, we find strong evidence that firms in countries with a higher level of societal trust have higher research and development (R&D) investment input. This is because that higher trust could mitigate information asymmetries, lower monitoring and transaction costs, and ease corporate financial constraints to motivate innovation. Moreover, we find the impact of societal trust on R&D investment is more pronounced in the countries with poor intellectual property rights (IPRs) protection.

Suggested Citation

  • Meng, Yijun & Wang, Xun & Zhang, Guoguo & Zheng, Shilin, 2021. "Trust and corporate R&D investment: Cross-country evidence," Finance Research Letters, Elsevier, vol. 40(C).
    • Handle: RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320307133
    DOI: 10.1016/j.frl.2020.101696
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    Cited by:

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    2. Iryna Storonyanska & Olena Ivashko & Elena Mieszajkina, 2022. "Trust as a Catalyst of Economic Growth: A National and Regional Breakdown," Sustainability, MDPI, vol. 14(22), pages 1-14, November.
    3. Wang, Kewen & Qiao, Yuanbo, 2023. "A comprehensive test on the impact of positive performance feedback on corporate R&D investment," Finance Research Letters, Elsevier, vol. 58(PC).
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    5. Zheng, Panpan & Li, Zhen & Zhuang, Ziyin, 2023. "The impact of judicial protection of intellectual property on digital innovation: Evidence from China," Finance Research Letters, Elsevier, vol. 58(PA).
    6. Fang, Hongxing & Chen, Linghong & Xiong, Jiacai & Zhu, Yushu, 2024. "Social Trust and Entrepreneurship: Insights from China's Social Credit System," Finance Research Letters, Elsevier, vol. 62(PA).
    7. Tang, Le & Sun, Shiyu, 2021. "How does leader self-deprecating humor affect creative performance? The role of creative self-efficacy and power distance," Finance Research Letters, Elsevier, vol. 42(C).
    8. Gao, Feiyang & Tao, Yunqing & Chen, Dong & Cao, Yuyang, 2023. "Stringent financial regulation and corporate R&D investment: Evidence from a quasi-natural experiment in China," Finance Research Letters, Elsevier, vol. 55(PB).
    9. Gheorghe Hurduzeu & Radu Lupu & Iulia Lupu & Adrian Cantemir Calin, 2022. "The Nexus Between Research and Development, Protection of Intellectual Property Rights and Financial Development. A European Perspectiv," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 24(Special16), pages 970-970, November.
    10. Lipeng Sun & Nur Ashikin Mohd Saat, 2023. "How Does Intelligent Manufacturing Affect the ESG Performance of Manufacturing Firms? Evidence from China," Sustainability, MDPI, vol. 15(4), pages 1-20, February.
    11. Shi, Lisi & Ho, Kung-Cheng & Liu, Ming-Yu, 2023. "Does societal trust make managers more trustworthy?," International Review of Financial Analysis, Elsevier, vol. 86(C).

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    More about this item

    Keywords

    Societal trust; R&D expenditure; Innovation; Intellectual property rights protection;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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