Non-local chambers of commerce and corporate innovation

Non-local chamber of commerce (NLC) is a private sector business association based on hometown networks that aims to assist in the development of member firms. We explore its effect on corporate innovation. Using a large sample of Chinese public companies from 2007 to 2020, we find a significantly positive effect on corporate innovation after firms join NLCs, indicating that NLCs help enhance corporate innovation. The finding remains robust after employing the instrumental variable approach, the Heckman two-stage model, propensity score matching, the entropy balancing approach, the difference-in-differences model, and several other robustness tests. Further analyses reveal that alleviating financing constraints, developing business partners, and improving information transparency are potential mechanisms through which non-local chambers of commerce help promote corporate innovation. Cross-sectional analyses reveal that the impact of NLCs on corporate innovation is more pronounced for firms operating in regions with lower social trust, tighter financing environments, and more competitive industries. Overall, the findings highlight the role of informal business networks in advancing corporate innovation in emerging markets.