Dialect diversity and total factor productivity: Evidence from Chinese listed companies

Using a sample of Chinese listed companies over the 2007-2019 period, we examined the influence of dialect diversity on a firm's total factor productivity. We found that dialect diversity affects the psychological distance of interpersonal communication and significantly affects the firm's total factor productivity. The results are robust to a battery of tests based on different specifications. The relationship between dialect diversity and a firm's total factor productivity is more pronounced in state-owned enterprises, firms located in southern regions, and more capital-intensive firms. Furthermore, we demonstrated an innovative factor flow mechanism and a human capital accumulation mechanism through which dialect diversity inhibits total factor productivity. Overall, this paper provides new evidence and decision-making reference for coordinating the protection of dialect diversity and high-quality economic development.