How does regional religiosity influence corporate innovation? New evidence from China

ABSTRACT

This study examines the impact of regional religiosity on corporate innovation. We find that religiosity has a significantly positive influence on innovation performance of Chinese listed firms. The mechanism analysis indicates that regional religiosity enhances the level of regional social fairness, which explains the positive relation between religiosity and innovation of firms headquartered in the region. However, regional religiosity, an informal institutional factor, only promotes innovation in privately-owned corporations, not in state-owned enterprises in which political objectives are prevalent and which are therefore less likely to be affected by informal institutional factors.

KEYWORDS:

• Regional religiosity
• corporate innovation
• social fairness
• China

JEL CLASSIFICATION:

• O18
• O30
• R21

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

¹ According to a study conducted in 2012 by the Pew Research Center, only 16% of the world’s population is not affiliated with any religion. Data are from https://www.pewforum.org/2012/12/18/global-religious-landscape-exec/.

² Data are collected from https://www.cfr.org/backgrounder/religion-china.

³ Sufficient valid responses on religiosity were received in the survey years of 2013, 2015, 2017 from 28 provinces (autonomous region or municipality).

⁴ Believers in Islam in China are clustered in Ningxia province (officially Ningxia Hui Autonomous Region), therefore the regional religiosity ratio of Ningxia is much higher compared with other provinces.

⁵ Chinese patent law recognizes three types of patents, including invention, utility model, and design patents. Invention and utility model patents require a higher degree of innovative activities, therefore, patent applications on invention and utility model can serve as a measure of the quality of corporate innovation (Qiao and Li 2019).

⁶ For robustness checks, we exclude firms headquartered in Ningxia and Sichuan where the religiosity is very high or low and re-run the regressions. The results are quantitatively similar to those reported in Table 2..

⁷ There are five options for answers: 1. Strongly disagree; 2. Disagree; 3. Neutral; 4. Agree; 5. Strongly agree.