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Historical institution and corporate Innovation: Evidence from China’s Civil-service Examination

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  • Liu, Ruilin
  • Zhang, Zheyuan
  • Li, Dan

Abstract

Previous research indicates that historical institutions are crucial to the functioning and development of an economy. However, little is known about whether and how a historical institution affects current entrepreneurial activities. In ancient China, the Civil-service Examination (CSE), also known as keju, was the most important institution for selecting scholar-officials and had long-lasting effects. Using the variation in the historical success in keju across prefectures, this paper empirically examines the impact of the CSE on local corporate innovation. We find that the density of jinshi, which is the highest achievement in keju, is positively correlated with the innovation productivity of local firms as measured by patent applications and citations. To determine causality, we employ an instrumental variable and a quasi-experiment in early Qing period. Further tests suggest that the CSE promotes corporate innovation by fostering a forward-looking stance in firms, enhancing firms’ human capital level, and increasing local social capital. Overall, our results indicate that the CSE has a real and long-lasting impact on today’s firm innovation.

Suggested Citation

  • Liu, Ruilin & Zhang, Zheyuan & Li, Dan, 2024. "Historical institution and corporate Innovation: Evidence from China’s Civil-service Examination," Journal of Contemporary Accounting and Economics, Elsevier, vol. 20(1).
    • Handle: RePEc:eee:jocaae:v:20:y:2024:i:1:s1815566923000358
    DOI: 10.1016/j.jcae.2023.100385
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    Keywords

    Historical institution; Corporate innovation; Cultural stance; Human capital; Social capital; G30; N35; Z13;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • N35 - Economic History - - Labor and Consumers, Demography, Education, Health, Welfare, Income, Wealth, Religion, and Philanthropy - - - Asia including Middle East
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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