Merchant guild culture and innovation: evidence from China

In this study, we explore the implications of merchant guild culture for corporate innovation. We find that merchant guild culture significantly improves corporate innovation, particularly strategic innovation. Further analyses show that merchant guild culture promotes corporate innovation by alleviating financing constraints and curbing earnings management. The results of the heterogeneity test show that the positive effect of merchant guild culture on innovation is more significant in firms owned by non-state, with high integration of foreign cultures, high government subsidies, and higher marketability. In addition, the stronger merchant guild culture influence is, the more innovation affects firm profitability and productivity. Collectively, our results suggest that merchant guild culture is a driving force that promotes trust and cooperation between firms. Therefore, merchant guild culture can effectively enhance innovation and performance as well as exerting a positive influence on innovative economic development.