Mercantile culture and corporate innovation: evidence from China

We investigate the role of mercantile culture in corporation innovation from the perspective of Chinese historical culture. Using a sample of listed firms located in areas with cultural origin in China, we show that mercantile culture has a significantly positive effect on firm innovation. Higher level of marketization with better legal environment and less market distortion strengthen the association of culture and corporate innovation. Furthermore, much more internal resource slack also helps to realize the positive role of mercantile culture on firm R&D activities. We conclude that regional culture, as an informal institution, makes a difference in corporate innovation decisions.