Scandinavian Working Papers in Economics

Stockholm School of Economics Asia Working Paper Series,
Stockholm School of Economics, Stockholm China Economic Research Institute

No 2017-46: How Beliefs Influence Behavior: Confucianism and Innovation in China

Xunan Feng , Zhi Jin and Anders C. Johansson ()
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Xunan Feng: Southwestern University of Finance and Economics
Zhi Jin: Southwestern University of Finance and Economics
Anders C. Johansson: Stockholm China Economic Research Institute, Postal: Stockholm School of Economics, P.O. Box 6501, SE-113 83 Stockholm, Sweden

Abstract: Previous studies have studied how religious beliefs may affect economic activity. We extend this literature by examining how Confucianism is linked to innovative activities at the firm level in China. We analyze the relationship between Confucianism and several proxies for inputs and outputs of innovative activities. Our results show that Confucianism is significantly related to lower levels of innovative activities regardless of which measure for firm-level innovation we use. We also find that type of ultimate ownership influences this relationship, with innovation among state-controlled firms being significantly more affected by Confucianism. This study thus adds to the understanding of how traditional belief systems influence behavior at the firm level.

Keywords: Confucianism; Beliefs; Religion; Innovation; R&D; Patents; China

JEL-codes: O30; Z10

38 pages, November 16, 2017

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