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Geography, culture, and corporate innovation

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  • 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
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