IDEAS home Printed from https://ideas.repec.org/a/eee/pacfin/v56y2019icp310-329.html
   My bibliography  Save this article

Geography, culture, and corporate innovation

Author

Listed:
  • Wei, Yueling
  • Kang, Di
  • Wang, Yizhong

Abstract

The culture differences between the north and south of China provide us a unique perspective to study the microcosmic effect of regional culture. This paper is one of the first to investigate the effect and mechanism of regional culture on corporate innovation. We use the GLOBE cultural index to study the effect of regional cultural differences on corporate innovation and focus on collectivism dimension. We use four different measures of culture at the province and firm-level, respectively, including dialect culture, southern and northern culture, cross-cultural communication, and culture index. We find that: (1) Local dialects have a significant effect on corporate innovation; (2) CEOs born in the South are more innovative than the ones born in the North; (3) Cross-cultural communication significantly affects corporate innovation; (4) In-group collectivism and institutional collectivism provides an explanation for the difference in the effect of culture on corporate innovation. Our conclusion not only emphasizes the important effect of regional culture and cross-cultural communication on corporate innovation but also highlights the role of collectivistic culture.

Suggested Citation

  • Wei, Yueling & Kang, Di & Wang, Yizhong, 2019. "Geography, culture, and corporate innovation," Pacific-Basin Finance Journal, Elsevier, vol. 56(C), pages 310-329.
    • Handle: RePEc:eee:pacfin:v:56:y:2019:i:c:p:310-329
    DOI: 10.1016/j.pacfin.2019.06.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0927538X19300927
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.pacfin.2019.06.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Charles M. Tiebout, 1956. "A Pure Theory of Local Expenditures," Journal of Political Economy, University of Chicago Press, vol. 64(5), pages 416-416.
    2. Zheng, Xiaolan & El Ghoul, Sadok & Guedhami, Omrane & Kwok, Chuck C.Y., 2012. "National culture and corporate debt maturity," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 468-488.
    3. Caggese, Andrea, 2012. "Entrepreneurial risk, investment, and innovation," Journal of Financial Economics, Elsevier, vol. 106(2), pages 287-307.
    4. R. David Mclean & Jeffrey Pontiff, 2016. "Does Academic Research Destroy Stock Return Predictability?," Journal of Finance, American Finance Association, vol. 71(1), pages 5-32, February.
    5. Chen, Yangyang & Podolski, Edward J. & Veeraraghavan, Madhu, 2017. "National culture and corporate innovation," Pacific-Basin Finance Journal, Elsevier, vol. 43(C), pages 173-187.
    6. Vivian W. Fang & Xuan Tian & Sheri Tice, 2014. "Does Stock Liquidity Enhance or Impede Firm Innovation?," Journal of Finance, American Finance Association, vol. 69(5), pages 2085-2125, October.
    7. Alberto Bisin & Thierry Verdier, 2000. ""Beyond the Melting Pot": Cultural Transmission, Marriage, and the Evolution of Ethnic and Religious Traits," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(3), pages 955-988.
    8. Lin, Chen & Lin, Ping & Song, Frank, 2010. "Property rights protection and corporate R&D: Evidence from China," Journal of Development Economics, Elsevier, vol. 93(1), pages 49-62, September.
    9. Dirk Czarnitzki & Andrew A. Toole, 2011. "Patent Protection, Market Uncertainty, and R&D Investment," The Review of Economics and Statistics, MIT Press, vol. 93(1), pages 147-159, February.
    10. Chen, Yongmin & Puttitanun, Thitima, 2005. "Intellectual property rights and innovation in developing countries," Journal of Development Economics, Elsevier, vol. 78(2), pages 474-493, December.
    11. Ruan, Jianqing & Xie, Zhuan & Zhang, Xiaobo, 2015. "Does rice farming shape individualism and innovation?," Food Policy, Elsevier, vol. 56(C), pages 51-58.
    12. Cornaggia, Jess & Mao, Yifei & Tian, Xuan & Wolfe, Brian, 2015. "Does banking competition affect innovation?," Journal of Financial Economics, Elsevier, vol. 115(1), pages 189-209.
    13. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2015. "Corporate Culture, Societal Culture, and Institutions," American Economic Review, American Economic Association, vol. 105(5), pages 336-339, May.
    14. Faleye, Olubunmi & Kovacs, Tunde & Venkateswaran, Anand, 2014. "Do Better-Connected CEOs Innovate More?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 49(5-6), pages 1201-1225, December.
    15. Aggarwal, Raj & Goodell, John W., 2014. "National cultural dimensions in finance and accounting scholarship: An important gap in the literatures?," Journal of Behavioral and Experimental Finance, Elsevier, vol. 1(C), pages 1-12.
    16. Wang, Yizhong & Chen, Carl R. & Huang, Ying Sophie, 2014. "Economic policy uncertainty and corporate investment: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 26(C), pages 227-243.
    17. Shane, Scott, 1993. "Cultural influences on national rates of innovation," Journal of Business Venturing, Elsevier, vol. 8(1), pages 59-73, January.
    18. Yuriy Gorodnichenko & Gerard Roland, 2017. "Culture, Institutions, and the Wealth of Nations," The Review of Economics and Statistics, MIT Press, vol. 99(3), pages 402-416, July.
    19. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "Does Culture Affect Economic Outcomes?," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 23-48, Spring.
    20. BaoChun Zhao & ShanShan Xu, 2013. "Does Consumer Unethical Behavior Relate to Birthplace? Evidence from China," Journal of Business Ethics, Springer, vol. 113(3), pages 475-488, March.
    21. Sam Han & Tony Kang & Stephen Salter & Yong Keun Yoo, 2010. "A cross-country study on the effects of national culture on earnings management," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 41(1), pages 123-141, January.
    22. Chang, Kiyoung & Noorbakhsh, Abbas, 2009. "Does national culture affect international corporate cash holdings?," Journal of Multinational Financial Management, Elsevier, vol. 19(5), pages 323-342, December.
    23. Herrmann-Pillath, Carsten & Libman, Alexander & Yu, Xiaofan, 2014. "Economic integration in China: Politics and culture," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 470-492.
    24. Oliver E. Williamson, 2000. "The New Institutional Economics: Taking Stock, Looking Ahead," Journal of Economic Literature, American Economic Association, vol. 38(3), pages 595-613, September.
    25. Taylor, Mark Zachary & Wilson, Sean, 2012. "Does culture still matter?: The effects of individualism on national innovation rates," Journal of Business Venturing, Elsevier, vol. 27(2), pages 234-247.
    26. Xiang-yang Zhao & Michael Frese & Angelo Giardini, 2010. "Business owners’ network size and business growth in China: The role of comprehensive social competency," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 22(7-8), pages 675-705, November.
    27. Tate, Geoffrey & Yang, Liu, 2015. "Female leadership and gender equity: Evidence from plant closure," Journal of Financial Economics, Elsevier, vol. 117(1), pages 77-97.
    28. Sung C. Bae & Kiyoung Chang & Eun Kang, 2012. "Culture, Corporate Governance, And Dividend Policy: International Evidence," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 35(2), pages 289-316, June.
    29. Chang, Xin & Fu, Kangkang & Low, Angie & Zhang, Wenrui, 2015. "Non-executive employee stock options and corporate innovation," Journal of Financial Economics, Elsevier, vol. 115(1), pages 168-188.
    30. Chen, Yangyang & Podolski, Edward J. & Rhee, S. Ghon & Veeraraghavan, Madhu, 2014. "Local Gambling Preferences and Corporate Innovative Success," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 49(1), pages 77-106, February.
    31. Shane, Scott A., 1992. "Why do some societies invent more than others?," Journal of Business Venturing, Elsevier, vol. 7(1), pages 29-46, January.
    32. Lin, Chen & Lin, Ping & Song, Frank M. & Li, Chuntao, 2011. "Managerial incentives, CEO characteristics and corporate innovation in China's private sector," Journal of Comparative Economics, Elsevier, vol. 39(2), pages 176-190, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zuo, Jingjing & Huang, Changqing & Qiu, Baoyin & Mai, Ruidong, 2023. "The construction of social credit system and corporate innovation: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 81(C).
    2. 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).
    3. Boubakri, Narjess & Chkir, Imed & Saadi, Samir & Zhu, Hui, 2021. "Does national culture affect corporate innovation? International evidence," Journal of Corporate Finance, Elsevier, vol. 66(C).
    4. Kong, Xiaoran & Zhang, Xueying & Yan, Cheng & Ho, Kung-Cheng, 2022. "China's historical imperial examination system and corporate social responsibility," Pacific-Basin Finance Journal, Elsevier, vol. 72(C).
    5. Zhang, Xuezhi & Wu, Wenxin & Zhou, Zixun & Yuan, Lin, 2020. "Geographic proximity, information flows and corporate innovation: Evidence from the high-speed rail construction in China," Pacific-Basin Finance Journal, Elsevier, vol. 61(C).
    6. Kong, Dongmin & Zhao, Ying & Liu, Shasha, 2021. "Trust and innovation: Evidence from CEOs' early-life experience," Journal of Corporate Finance, Elsevier, vol. 69(C).
    7. Hu, Huiting & Yu, Gangning & Xiong, Xueli & Guo, Lijia & Huang, Jiashun, 2022. "Cultural Diversity and Innovation: An Empirical Study from Dialect," Technology in Society, Elsevier, vol. 69(C).
    8. Jin, Peizhen & Mangla, Sachin Kumar & Song, Malin, 2021. "Moving towards a sustainable and innovative city: Internal urban traffic accessibility and high-level innovation based on platform monitoring data," International Journal of Production Economics, Elsevier, vol. 235(C).
    9. Li, Guoxing & Yeh, Yin-Hua, 2023. "Western cultural influence on corporate innovation: Evidence from Chinese listed companies," Global Finance Journal, Elsevier, vol. 55(C).
    10. Guo, Ping & Shi, Guifeng & Tian, Gary Gang & Duan, Siqi, 2021. "Politicians’ hometown favoritism and corporate investments: The role of social identity," Journal of Banking & Finance, Elsevier, vol. 125(C).
    11. Pi, Tianlei & Yang, Xiaobing, 2023. "Board culture and bank innovation: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 732-755.
    12. Liu, Xiaohua & Zhao, Qiuhan, 2024. "Banking competition, credit financing and the efficiency of corporate technology innovation," International Review of Financial Analysis, Elsevier, vol. 94(C).
    13. Yingrun Chen & Yi Zhang, 2023. "Do Regional Cultural Differences Affects the Effect of Accounting Firms’ Merger: Evidence From China," SAGE Open, , vol. 13(2), pages 21582440231, June.
    14. Wang, Jianxin & Huang, Cailing & Xu, Lin & Zhang, Junhuan, 2023. "Drinking into friends: Alcohol drinking culture and CEO social connections," Journal of Economic Behavior & Organization, Elsevier, vol. 212(C), pages 982-995.
    15. Xiong, Jiacai & Yang, Zelin & Wang, Xin & Chan, Kam C., 2023. "Does dialect diversity affect entrepreneurial activities? Evidence from China," Economic Modelling, Elsevier, vol. 128(C).
    16. Cui, Xin & Wang, Chunfeng & Liao, Jing & Fang, Zhenming & Cheng, Feiyang, 2021. "Economic policy uncertainty exposure and corporate innovation investment: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    17. Zhang, Chunyang & Zhang, Dongsheng, 2023. "Executive incentives, team stability and corporate innovation performance," Finance Research Letters, Elsevier, vol. 58(PD).
    18. Li, Yanlin & Tian, Gary Gang & Wang, Xin, 2021. "The effect of Guanxi culture on the voting of independent directors: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Boubakri, Narjess & Chkir, Imed & Saadi, Samir & Zhu, Hui, 2021. "Does national culture affect corporate innovation? International evidence," Journal of Corporate Finance, Elsevier, vol. 66(C).
    2. Pascal Gantenbein & Axel Kind & Christophe Volonté, 2019. "Individualism and Venture Capital: A Cross-Country Study," Management International Review, Springer, vol. 59(5), pages 741-777, October.
    3. Yingrun Chen & Yi Zhang, 2023. "Do Regional Cultural Differences Affects the Effect of Accounting Firms’ Merger: Evidence From China," SAGE Open, , vol. 13(2), pages 21582440231, June.
    4. Assmann, Daisy & Ehrl, Philipp, 2021. "Individualistic culture and entrepreneurial opportunities," Journal of Economic Behavior & Organization, Elsevier, vol. 188(C), pages 1248-1268.
    5. Cui, Xin & Wang, Chunfeng & Liao, Jing & Fang, Zhenming & Cheng, Feiyang, 2021. "Economic policy uncertainty exposure and corporate innovation investment: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    6. Maurya, Garima & Sahu, Sohini, 2022. "Cross-country variations in economic complexity: The role of individualism," Economic Modelling, Elsevier, vol. 115(C).
    7. Tobias Steindl, 2021. "Cultural rule orientation, legal institutions, and the credibility of corporate social responsibility reports," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(1), pages 310-332, January.
    8. Wang, Yizhong & Wei, Yueling & Song, Frank M., 2017. "Uncertainty and corporate R&D investment: Evidence from Chinese listed firms," International Review of Economics & Finance, Elsevier, vol. 47(C), pages 176-200.
    9. Wang, Xiaoyu & Long, Zhineng & Zhao, Xiangfang, 2024. "Merchant guild culture and cash holdings: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 94(C).
    10. Chkir, Imed & El Haj Hassan, Boushra & Rjiba, Hatem & Saadi, Samir, 2021. "Does corporate social responsibility influence corporate innovation? International evidence," Emerging Markets Review, Elsevier, vol. 46(C).
    11. Daniel L. Bennett & Boris Nikolaev, 2021. "Individualism, pro-market institutions, and national innovation," Small Business Economics, Springer, vol. 57(4), pages 2085-2106, December.
    12. Shigang Li & Kexin She & Li Zhang, 2024. "Bureaucratic Culture and Innovation," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 32(3), pages 31-66, May.
    13. Aram, Mohsen & Nejadmalayeri, Ali, 2023. "National culture, lines of credit, and firm liquidity," International Review of Financial Analysis, Elsevier, vol. 90(C).
    14. Jackowicz, Krzysztof & Kowalewski, Oskar & Kozłowski, Łukasz, 2022. "Foreign bank lending: The role of home country culture during prosperous and crisis periods," Journal of Multinational Financial Management, Elsevier, vol. 66(C).
    15. Jayasekara, Dinithi N. & Fredriksson, Per G., 2021. "Culture, intellectual property rights, and technology adoption," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 317-330.
    16. Jin, Yi & Gao, Xin & Li, Donghui, 2022. "The effect of individualism on bank risk and bank Performance: An international study," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 80(C).
    17. Klasing, Mariko J., 2013. "Cultural dimensions, collective values and their importance for institutions," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 447-467.
    18. Ding, Xiaoya (Sara) & Guo, Mengmeng & Kuai, Yicheng & Niu, Geng, 2023. "Social trust and firm innovation: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 84(C), pages 474-493.
    19. Li, Guoxing & Yeh, Yin-Hua, 2023. "Western cultural influence on corporate innovation: Evidence from Chinese listed companies," Global Finance Journal, Elsevier, vol. 55(C).
    20. Gaganis, Chrysovalantis & Pasiouras, Fotios & Voulgari, Fotini, 2019. "Culture, business environment and SMEs' profitability: Evidence from European Countries," Economic Modelling, Elsevier, vol. 78(C), pages 275-292.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:pacfin:v:56:y:2019:i:c:p:310-329. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/pacfin .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.