Confucian culture and corporate innovation

In today's highly competitive market, innovation has become a core driver of corporate competitiveness. We aim to examine the causal relationship between Confucian culture, an informal institution, and corporate innovative capacity. To achieve this, we constructed an unbalanced panel dataset of Chinese listed companies from 1990 to 2022. We use the Jinshi density as a proxy for Confucian culture and measured the innovation activity by corporate patents. Our empirical results suggest that Confucian culture will suppress corporate innovation activity. Mechanism analysis shows that corporates deeply influenced by Confucian culture tend to have heightened risk perception, thus exaggerating uncertainty and tending to reduce investment in R&D, a high-uncertainty activity. Additionally, we explored the impact of Confucian culture in the chairman's city of origin and the corporate location on its innovation activity. The results indicate that Confucian culture in the corporate location plays a dominant role in inhibiting innovation capacity. Our results provide theoretical and practical insights into the role of Confucian culture in contemporary corporate innovation and contribute to the existing research on factors influencing corporate innovation capacity.