Invisible handcuffs: Nepotism culture and SMEs’ innovation

Wenyu Xie, Weijun Yin and Dorothy Tu

Finance Research Letters, 2025, vol. 72, issue C

Abstract: This paper investigates how nepotism culture affects SMEs’ innovation behavior. Using a large international datasets of small and medium enterprises, we establish the negative effect of nepotism culture on SMEs’ innovation, and observe the heterogeneous impact based on the presence of informal payments, financial constraints, and female ownership. Our results suggest that nepotism culture hinders highly skilled human capital and formal training, both of which are paramount for technological advancement and economic development. The policy implication is that promoting merit-based recruitment and reducing nepotistic practices could enhance innovation capacity, especially by fostering a more competitive environment.

Keywords: Nepotism; SMEs; Innovation; Informal institution; Human capital (search for similar items in EconPapers)
JEL-codes: J24 M54 O17 O31 Z10 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612324016180
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:72:y:2025:i:c:s1544612324016180

DOI: 10.1016/j.frl.2024.106589

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().