Abstract
AbstractWe examine the influence of corporate culture on innovation using a unique set of data from Chinese listed companies over the period 2008–2017. Using the competing value framework, we quantify corporate culture using textual analysis of financial statements. We find a positive and significant impact of a creation culture on innovation measured by both patent applications and citations, as well as innovation efficiency. We address endogeneity concerns and conduct a battery of robustness tests, including alternative proxies for both corporate innovation and culture, and conclude that variations in culture have a significant impact on firm‐level innovation. We also show that a strong creation culture is more likely to spur innovation for firms in more competitive product markets and firms that are subject to higher managerial career concerns. We provide empirical evidence that corporate culture is an important driver in enhancing innovation. Our results have clear implications for directors and shareholders.
Highlights
Innovation has been considered a vital factor for organizations that aim to achieve and sustain a competitive advantage (Baer, 2012; Nelson and Winter, 1982; Porter, 1992)
We investigate whether, and to what extent, corporate creation culture influences firm innovation in the Chinese market
Using all listed firms on both the Shanghai and Shenzhen stock exchanges between 2008 and 2017, we find strong and consistent evidence that a creation culture positively affects innovation
Summary
Innovation has been considered a vital factor for organizations that aim to achieve and sustain a competitive advantage (Baer, 2012; Nelson and Winter, 1982; Porter, 1992). We control for board size, board independence and whether the CEO is chairman of the board.15 The results presented in Table 4 show that the coefficient for creation culture is positive and statistically significant across all innovation variables, and our baseline results are robust to these additional controls.16
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