The long-term effect of western customs institution on firm innovation in China

Gan Jin and Günther G. Schulze

Journal of Economic Behavior & Organization, 2025, vol. 237, issue C

Abstract: Can cultural norms fostered by historical institutions affect today’s firm innovation? We analyze a historical experiment in China in 1902, when the foreign-run Chinese Maritime Customs Service (CMC), known for its efficient and transparent governance, took over some of the Chinese Native Customs stations and improved their governance. Using a large data set of contemporary industrial firms in China and an IV strategy that exploits the takeover criterion for identification, we show that firms in locations historically affected by the CMC rules exhibit higher innovation intensities today, which can be attributed to the persisting norms of honesty and lawfulness embedded in the CMC institution. They reduce corruption and misconduct for local governments and firms, even though the formal CMC institution was abolished in 1949.

Keywords: Innovation; Institutions; Culture; Corruption; China (search for similar items in EconPapers)
JEL-codes: D73 N45 N75 O31 Z10 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:237:y:2025:i:c:s0167268125002732

DOI: 10.1016/j.jebo.2025.107154

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