Can Confucian culture promote enterprise total factor productivity? Evidence from China

Abstract

Purpose

This study examines whether Confucian culture can promote enterprise total factor productivity (TFP), and it also studies how transmission mechanism works on enterprise TFP.

Design/methodology/approach

Based on the data of A-share listed companies on Shanghai and Shenzhen stock markets from 2008 to 2019, this study measures the influence of Confucian culture on enterprise TFP by the number of Confucian academies and Confucian temples within three radius ranges of a company's registered address.

Findings

The empirical results show that Confucian culture has a positive effect on the enterprise TFP. The transmission mechanism test shows that Confucian culture can promote the TFP of Chinese enterprises through reducing agency cost, improving agency efficiency and enhancing innovation.

Practical implications

The findings in this study provide implications for policymakers, scholars and enterprises. The results show that Confucian culture can enhance the TFP of Chinese enterprises. Especially in emerging markets including China, the Confucian culture, as an informal institution, can effectively complement formal institutions, promoting enterprise TFP.

Originality/value

This study expands the literature on Confucian culture in two aspects: the influence of Confucian culture on TFP and its transmission mechanism. To the authors' knowledge, this is the first study to identify a link between Confucian culture and enterprise TFP.

Citation

Xiong, N. and Du, L. (2023), "Can Confucian culture promote enterprise total factor productivity? Evidence from China", International Journal of Emerging Markets, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJOEM-05-2022-0739