TY - JOUR
T1 - Social trust and firm innovation*
AU - El Ghoul, Sadok
AU - Gong, Zhaoran (Jason)
AU - Guedhami, Omrane
AU - Hou, Fangfang
AU - Tong, Wilson H.S.
N1 - Publisher Copyright:
© 2023 Elsevier B.V.
PY - 2023/4
Y1 - 2023/4
N2 - We investigate whether social trust improves corporate innovation. Based on a comprehensive firm-level panel dataset of patents filed by companies from 43 countries over 1995–2015, we find that compared with firms in low-trust countries, firms in high-trust countries have higher innovation output as measured by number of patents and patent forward citations. We also find that greater trust is associated with i) higher levels of innovation investment, ii) less volatile innovation investment over time, and iii) weaker relation between innovation investment and internally generated cash flow. Finally, we document that greater trust is associated with higher market valuation of innovation investment and more efficient conversion of innovation investment into future sales. Overall, our firm-level evidence indicates that greater social trust improves corporate innovation and its outcomes.
AB - We investigate whether social trust improves corporate innovation. Based on a comprehensive firm-level panel dataset of patents filed by companies from 43 countries over 1995–2015, we find that compared with firms in low-trust countries, firms in high-trust countries have higher innovation output as measured by number of patents and patent forward citations. We also find that greater trust is associated with i) higher levels of innovation investment, ii) less volatile innovation investment over time, and iii) weaker relation between innovation investment and internally generated cash flow. Finally, we document that greater trust is associated with higher market valuation of innovation investment and more efficient conversion of innovation investment into future sales. Overall, our firm-level evidence indicates that greater social trust improves corporate innovation and its outcomes.
KW - Corporate innovation
KW - Innovation input
KW - Innovation output
KW - Trust
UR - http://www.scopus.com/inward/record.url?scp=85150029997&partnerID=8YFLogxK
U2 - 10.1016/j.intfin.2023.101745
DO - 10.1016/j.intfin.2023.101745
M3 - Article
AN - SCOPUS:85150029997
SN - 1042-4431
VL - 84
JO - Journal of International Financial Markets, Institutions and Money
JF - Journal of International Financial Markets, Institutions and Money
M1 - 101745
ER -