Clan culture and corporate innovation

Abstract

Cultural traditions have consistently shaped people's values and beliefs, thereby influencing various aspects of society, including the economy. This paper examines the impact of kinship-based clans, an exceptionally significant social organization in premodern China, on contemporary corporate innovation. By utilizing the number of genealogies as a proxy for local clan strength, we find compelling evidence that firms in prefectures with a more pronounced clan culture produce greater innovative outputs. Delving into potential channels, our analysis demonstrates that clans can act as informal institutional arrangements, offer managerial incentives, and ease financial constraints. Moreover, the kinship-based clan background of CEOs spurs innovation activities.