Sustainable Development of Traditional Business Culture: Merchant Guild Culture and Enterprise Innovation

Abstract

By exploring the positive elements of traditional business culture and combining them with modern enterprise management concepts, this paper aims to realize the sustainable development of enterprises and cultural heritage and innovation. In this context, this study empirically examines the impact and mechanisms of merchant guild culture (MGC) on corporate innovation, using A-share listed companies from 2010 to 2022 as a sample. The findings indicate that MGC positively influences contemporary corporate innovation through both external and internal channels. External channels include alleviating financing constraints and enhancing ESG performance, and internal influence channels such as improving integrity and emphasizing human capital. Additionally, social networks strengthen the relationship between MGC and corporate innovation. Furthermore, using the legal environment as a moderating variable has led to the discovery of a certain substitution relationship between formal and informal institutions. A heterogeneity analysis further shows that the effect of MGC on innovation is more pronounced in enterprises with low-risk preference and a foreign cultural impact.

1. Introduction

Innovation is the inexhaustible driving force behind national prosperity. Nowadays, technological innovation has become a crucial tool in leading international competition. The greater a country’s innovation index, the higher its level of economic development [1]. By 2035, China aims to achieve technological self-reliance and strength, positioning itself among the world’s leading innovative nations. Currently, China’s economy is in the process of transitioning from an input-driven to an innovation-driven model. Enterprises are the primary engines of market innovation. In 2022, over 75% of China’s R&D investment came from enterprises (https://www.most.gov.cn/xwzx/twzb/fbh23022401/twzbwzsl/202302/t20230224_184732.html, accessed on 25 December 2024). Promoting high-quality social development hinges on stimulating the innovative vitality of enterprises and enhancing innovation efficiency. Therefore, studying innovation at the micro level, specifically in enterprises, is of great significance.

Currently, a significant amount of research has examined the primary factors influencing corporate innovation, particularly from the perspective of formal institutions, such as macroeconomic policies, government subsidies, business environment, digital finance, ownership structure, and salary disparity [2,3,4,5,6,7]. However, as pointed out by North [8] and Acemoglu et al. [9], informal institutions, such as social practices, values, and cultural norms, also play a vital role in influencing corporate behavior. Informal institutions, including customs, traditions, and implicit social norms, can profoundly shape the ways in which companies innovate and operate. This is particularly significant in contexts where formal institutions are still developing or are less robust [10]. However, few studies have explored the impact of sociocultural implicit value norms on corporate behavior. This is especially important in China, where the market mechanism is still underdeveloped, the institutional environment is evolving, and traditional culture plays a powerful role [11].

Existing research has emphasized the importance of traditional cultural factors in shaping corporate behavior and innovation outcomes in China. Studies have shown that cultural factors such as religious traditions, Confucian culture, dialects, maritime culture, ethnic culture, and social capital can significantly influence innovation [12,13,14,15]. For example, Xu et al. [16] found that Confucian thought, which emphasizes social harmony and respect for authority, can foster long-term business strategies conducive to innovation. Similarly, dialect diversity and regional identity have also been shown to affect entrepreneurial activities and innovation in China [17]. Wang et al. [18] found that the military culture significantly increased the company’s propensity for innovative risk-taking. These studies emphasize the vital influence of informal institutions in either supporting or hindering firm innovation.

Although the body of literature on the role of informal institutions has been increasing, there is limited research on the specific impact of merchant guild culture (MGC) on innovation at the firm level. As social and economic organizations, merchant guilds played an important role in trade and commercial development in ancient and modern societies, particularly in China [19]. Wu et al. [20] argued that MGC promotes corporate innovation by alleviating financing constraints and reducing managerial inefficiency. However, their study mainly focuses on the broader influence of merchant guilds on corporate behavior and does not explore the intrinsic characteristics of the guilds themselves. MGC is deeply embedded in the values and practices of firms and may have a more profound impact on innovation than other informal institutions [20]. This paper explores the specific characteristics of merchant guilds and examines their influence on corporate behavior and innovation, thereby extending the related research.

MGC is a fusion of Confucian values and entrepreneurial spirit, emphasizing values such as honesty, trust, and social responsibility [21]. These values not only supported the prosperity of ancient Chinese commerce but continue to influence contemporary business practices [22]. As the inheritors of this traditional culture, modern enterprises provide unique cultural support for cultivating the entrepreneurial spirit of the new era. Innovation and tradition are intertwined, requiring the absorption of the wisdom of the past while creating something new. In this sense, innovation can be viewed as a process of inheriting and transforming traditional values to meet contemporary challenges [20]. Currently, research on MGC mainly focuses on the rise and fall of traditional guilds, business activities, organizational structures, and the spirit of the guild [19,21,23]. For example, Cai et al. [19] systematically compared the governance models of Hui merchants and Jin merchants during the Ming and Qing dynasties, while Wu et al. [24] found a significant correlation between the development of local clans and the rise of merchant guilds. Western studies on merchant guilds have mainly focused on historical institutionalism. Grief [25] conducted a comparative study of the Genoese and Maghribi merchant groups, analyzing their cultural characteristics, governance structures, and their relationship with commercial development.

Recent studies have begun to explore the relationship between MGC and corporate behavior. Du et al. [26] found that MGC is associated with lower agency costs, helping to reduce conflicts between managers and shareholders. Liu et al. [27] showed that firms situated in regions with a rich tradition of MGC generally experience higher economic development. In addition, Wang et al. [23] observed that companies influenced by MGC tend to maintain lower cash reserves, reflecting greater capital utilization efficiency. Empirical research by Wang et al. [28] also revealed that MGC is negatively associated with corporate financing and positively correlated with business credit. These studies underscore the critical role that MGC plays in shaping modern corporate behavior. The long-term success of MGC is ultimately manifested in a firm’s global reputation for producing high-quality products. Building on these insights, this paper examines the effect of MGC on contemporary enterprise innovation, aiming to explore the present-day values and functions of this cultural influence. This research carries significant practical implications.

The contributions of this paper are threefold. First, it broadens the perspective on corporate innovation research; while most existing literature focuses on formal institutions, studies on informal institutions have largely concentrated on Confucian culture, religion, and others [12,16]. MGC, as a specific form of informal institution in certain regions, is deeply connected to corporate ethical behavior and offers a unique lens through which to explore the influence of Eastern cultural contexts. Second, by quantitatively analyzing MGC and its impact on enterprise innovation, this paper extends the empirical literature on the economic consequences of MGC. Most existing research relies on qualitative and descriptive analyses [19,24]. This paper adds empirical evidence of a positive correlation between MGC and innovation, revealing its positive impact on contemporary corporate innovation. Third, this paper investigates the internal mechanisms of MGC, such as emphasizing honesty, integrity, and valuing talent [21]. These intangible assets are key drivers of modern corporate innovation and business success. At the same time, this paper introduces a new perspective by examining the influence of MGC on corporate innovation through the perspective of ESG performance. The “balance of righteousness and profit” advocated for by MGC, with its emphasis on social responsibility, aligns with the ESG focus on balancing economic and social values to enhance corporate sustainability. Although the concept of ESG is relatively new, firms with a strong MGC have long fostered positive values, emphasizing social responsibility, improving corporate sustainability, and balancing economic and social values, thus providing solid support for corporate innovation and sustainable development.

2. Historical Background, Theoretical Analysis, and Research Assumptions

2.1. Background of Merchant Guilds

The German geographer Richthofen said more than 100 years ago that the Chinese are one of the best people in business [29]. This shows the global recognition of the Chinese wisdom in doing business. The development of the economy in China’s history has experienced three climaxes: Qin–Han, Tang–Song, and Ming–Qing [30]. Before the Ming Dynasty, the business activities of Chinese merchants were mostly individual and dispersed. However, the rise of the Ming and Qing merchant guilds became one of the most important events in the course of China’s commercial development. They existed widely in China and medieval European countries and represented regional groups of merchants. The status of merchants increased dramatically, and the society and culture recognized commercial activities [30]. The emergence of merchant organizations such as the Jin merchants and the Hui merchants gave the domestic market the ability to accumulate monetary capital [31]. Connecting market networks between different local merchant guilds led to the formation of a worldwide trade network during the Ming and Qing dynasties. This marked the emergence of the first global economic system in world history [30]. According to Wu [31], merchant guilds have made an inestimable contribution to the promotion of China’s commodity economy.

Merchant guilds are typically organized around geographical regions, where groups of merchants and business organizations form based on geographic proximity and familial ties. The relationships between members are characterized by both closeness and looseness [21,32]; while there are variations in the cultures of different merchant guilds, certain common ethical principles prevail, such as honesty, trustworthiness, and prioritizing righteousness over profit. These values are universally embraced by merchant guilds [21,33]. Merchant guilds are spontaneous associations formed by merchants. As such, their legal status is not clearly defined in formal written laws. However, the merchant guilds of the Ming and Qing dynasties developed a set of relatively well-established management rules and regulations through long-term social practices [27]. These rules were accepted, observed, and enforced by guild members, gradually evolving into business standards with regional characteristics. Over time, these standards culminated in the formation of a unique MGC [21]. Merchant guilds are known for their strong cohesion, creativity, and vitality. The rise and development of these guilds since the Ming and Qing dynasties have played a crucial role in the advancement of the commodity economy, the maintenance of market order, and the improvement of market mechanisms, which remain significant for current economic development [30].

2.2. Theoretical Analysis and Research Hypothesis

The business management model of a firm is deeply influenced by its specific cultural environment, which encompasses elements such as ethnicity, tradition, morality, and religious beliefs. Theoretically, informal institutions, such as religions, norms, traditions, and customs, are particularly stable and can remain virtually unchanged for thousands of years [9,34]. As enterprises evolve, they incorporate advanced global management techniques and methods, while still preserving their traditional cultural values [16]. Traditional culture plays a crucial role in guiding enterprise management and decision-making processes. Additionally, cultural identity fosters closer relationships among individuals, helping to form interpersonal networks and partnerships. The level of mutual trust between people directly influences their willingness to collaborate [35]. Through the alignment of values, a psychological contract is formed between enterprises and between enterprises and employees. This contract plays a crucial role in reducing supervision costs and, ultimately, facilitates corporate innovation [36].

While different merchant guilds possess unique cultural characteristics and beliefs, they share common ethical principles, such as valuing honesty, cooperation, and talent [21,32]. Throughout the origins and development of merchant guilds, a spirit of innovation, embodied in the pursuit of leadership and self-improvement, has been central. The six centuries of prosperous development of merchant guilds during the Ming and Qing dynasties clearly demonstrate that innovation is the driving force behind progress [24]. Innovation in enterprises results not only from internal efforts but also from the interplay of external factors.

Higher-order theory suggests that a firm’s strategic choices, such as product innovation and diversification, are influenced by the background and characteristics of the management team [37]. Stigma theory posits that the cultural upbringing and early experiences of management personnel shape their decision-making when managing firms [38]. In this context, MGC represents a significant external factor influencing corporate innovation. As social beings, humans share commonalities in their cultural practices [39]. Merchants in the same region share common dialects and customs, which promote exchange and cooperation, and broaden access to information, financial resources, and technical support. The integration of information and capital, facilitated by these cultural ties, creates favorable conditions for corporate innovation [23]. In summary, cultural identity increases the likelihood of consensus in decision-making and encourages innovative behavior within firms.

Merchant guilds themselves value change and embrace innovation. During the Ming and Qing dynasties, all merchant guilds demonstrated a constant flow of innovative ideas. For example, Jin merchants established systems of separation of powers and labor sharing, the Ningbo merchant guild founded banks and the insurance industry, and the Fujian merchant guild developed the ’ship government’ system [21]. These merchant guilds were notably sensitive to new ideas and practices. Innovation was seen as essential for entrepreneurs to stay ahead of the competition, and the MGC provided the right foundation for nurturing such innovation. In their operations, firms are not only influenced by local culture but also actively adapt to the cultural traditions of their location. By doing so, they foster exchange and integration with local culture, which better supports their business activities [40]. Innovation presupposes that entrepreneurs possess a certain spirit of adventure, and firms are the primary agents of innovation. In regions with strong MGC, entrepreneurs tend to exhibit pioneering spirits, which, in turn, enhances the innovative capacity of enterprises. Hence, we propose the hypothesis.

Hypothesis 1. 

MGC has a positive effect on enterprise innovation.

Building on previous research, this paper discusses in depth the channels through which MGC influences corporate innovation behavior, distinguishing between external and internal influence channels. The external influence channels are primarily reflected in the following.

First, MGC helps to alleviate financing constraints. The main obstacle to enterprise innovation is the lack of funds. Innovation itself is a high-input, high-risk, and long-term work. Capital is the first driving force of innovation activities [39]. However, sources of funding are sometimes difficult to obtain from formal sources and are usually time-consuming, small-scale, and have high interest rates [41]. MGC is based on blood, geographical, and business ties and forms a network of relationships, with closer ties and co-operation between internal members. Within the merchant guild network, information asymmetry is minimized, making information flow more efficient. As a result, it becomes easier for enterprises to access the information necessary for securing financing [32,42]. At the same time, the reputation-valuing characteristics of the MGC also play an important external monitoring role. Members of the merchant guild uphold honest business ethics among themselves. This credibility mechanism has led to the formation of good lending and borrowing relationships within the merchant guilds. With a high level of trust among members, financiers are willing to provide financial support to members for innovative activities [43]. The mutual trust and shared values within the guild create a stable environment where financial transactions are viewed as less risky, allowing businesses to access the capital needed to invest in new ideas and technologies. In turn, borrowers will keep their promises. This relationship network reduces the risk and cost of financing [42]. In addition, MGC emphasizes solidarity, cooperation, and risk-sharing. This spirit makes the financing resources within the merchant guild more concentrated and willing to share. This makes the amount and efficiency of financing increased, and accelerates the pace of enterprise innovation [44].

Second, MGC fosters the development of corporate social responsibility and promotes sustainable development. During the Ming and Qing dynasties, merchant guilds not only promoted the development of the regional economy, but also shaped excellent business ethics, including the concepts of honesty, righteousness and profitability, and responsibility through their own set of patriarchal laws, family rules, and rules of the trade [21,32,42]. ESG performance has been proposed in recent years as a measure of the extent to which companies integrate the interests of internal and external stakeholders [45]. ESG performance is closely linked to the righteousness and profitability present in the MGC. This concept stresses the importance of balancing morality and responsibility with the pursuit of economic benefits, without being solely profit-driven. It aligns with the core principles of ESG, which emphasize that firms should balance economic, social, and environmental interests in their operations [45,46]. MGC is concerned with social responsibility, including caring for fellows and organizations and giving back to society through disaster relief and donations and transfers [21,24,32]. This is in line with the ESG concept of focusing on corporate social responsibility, which requires companies to respect their employees in their operations, actively participate in social activities, and promote social development. MGC focuses on long-term development and pursues sustainable operation, which is in line with the sustainable view emphasized in ESG [45]. MGC usually takes the interests of stakeholders into account and maintains a balance between the interests of all parties, which is in line with ESG’s emphasis on focusing on stakeholders and encouraging companies to take into account the interests of all parties in their decision-making and operations [47]. MGC promotes traditional business values and integrates local culture and traditional spirit into business practices. This is related to the governance and social dimensions of ESG, which encourage companies to respect local cultures and values, and to integrate traditional culture into corporate governance and social responsibility fulfillment [48]. MGC is characterized by respect for nature and the environment, and the environmental dimension of ESG emphasizes the protection of the environment to promote sustainable development. ESG has become an important consideration in investment decisions and corporate management [46,48]. More and more companies are paying attention to their ESG performance and taking proactive measures to improve it. Research has demonstrated a significant positive correlation between ESG performance and innovation output [49]. MGC can form an enterprise’s own unique ESG system, a rating indicator that integrates environmental, social, and corporate governance factors. This implies that firms in regions influenced by MGC are more inclined to focus on social responsibility and sustainable development, which in turn promotes innovative activities. The following hypothesis is therefore formulated.

Hypothesis 2. 

MGC promotes corporate innovation by easing financing constraints.

Hypothesis 3. 

MGC promotes corporate innovation by enhancing corporate ESG performance.

The internal channels of influence of MGC on corporate innovation are primarily reflected in the following.

First, the merchant guild upholds the concept of honesty and trustworthiness. Integrity is a moral code consistently advocated by the merchant guild under the influence of Confucian culture and is the core value of the merchant guild’s culture [33,42,44]. Trust is based on integrity and exists not only between specific individuals but also across collective, organizational, and institutional levels. Trust increases the willingness to share knowledge among different firms and enhances the flow of information [50]. Because of their common cultural background, the regions in which the merchant guilds are located are more likely to establish a sense of trust and identity, thus promoting communication and cooperation and increasing the level of social trust [22]. The presence of such trust fosters the development of social capital [51], which provides the conditions for business innovation. Ding et al. [35] showed that increased social trust significantly enhanced firms’ innovative capabilities. At a time when China’s formal system is still imperfect and market competition is fierce, the ethical thinking of the merchant guild allows entrepreneurs to regulate their behavior from an informal perspective. Advocating for honesty and integrity across society can restrain unfair competition and create a good market environment, which in turn supports the sustainable development of firms and provides a better platform for innovation. Therefore, the emphasis on honesty and trustworthiness in MGC positively impacts the innovative growth of enterprises.

Second, the merchant guild focuses on investing in human capital. The merchant guild attaches importance to investment in education and regards talent as an important resource [21]. During the Ming and Qing dynasties, merchant guilds took the initiative to assume social responsibility, through capital accumulation to a certain extent, but also through vigorously investing in education, such as the construction of academies, family schools, and voluntary schools. Taking Jin merchants as an example, there were 385 voluntary schools in Shanxi in the Qing Dynasty, of which 189 were located in the Hedong area where Jin merchants were active. Jin merchants made great efforts to subsidize the cause of education. According to the “General Records of Shanxi” records, in the 2nd year of the reign of Yongzheng, the province of Shanxi had 275 hectares of school fields, 298 Liang of rent silver, and 1182 Dan of rent grain. In the 14th year of the Qianlong reign, 277 hectares of school fields were used to collect 257 Liang of silver rent and 1237 wen of rent money. A large part of the school fields were donated by Jin merchants. The income from the school fields was used to make up for the lack of funding for education [21]. The Ming and Qing merchant clans focused on investing in human capital, hiring heavily to enhance the vitality of their businesses [42]. For example, the labor-sharing system of the Jin merchants was a way of incentivizing managers, with the proprietor rewarding them with shares [19,21]. MGC strongly emphasizes the critical role of talent in the success of an enterprise, recognizing human capital as a key driver of innovation. Regarding modern enterprises, Qi et al. [52] observed that Huawei Enterprises implemented a TUP (Time Unit Plan) property rights system, and employees were incentivized according to different time periods, different share allotment systems, and salaries. Some studies have also higlighted the important role of human capital incentives for innovation. Zhou et al. [53] found that high levels of executive compensation can promote firms’ investment in innovation. Remuneration incentives for executives can compensate for the loss of short-term gains that executives bring to the innovation process and improve innovation efficiency [54]. Therefore, the following hypothesis is proposed.

Hypothesis 4. 

MGC focuses on corporate integrity, which in turn promotes corporate innovation.

Hypothesis 5. 

MGC focuses on human capital investment, which in turn promotes corporate innovation.

3. Research Design

3.1. Sample Selection

This study focuses on Chinese A-share listed companies from 2010 to 2022, excluding firms with special statuses such as ST and *ST, as well as companies from the financial sector. Samples with missing data are also omitted. To address potential outliers, the main continuous variables are winsorized at the 1% level. The final dataset used for the main regression analysis includes 28,642 observations. For data on the origin of merchant guilds, refer to Zhang et al. [21] and Weng et al. [43]. Data related to listed companies are from the China Stock Market and Accounting Research Database (CSMAR) (http://data.csmar.com) (accessed on 25 December 2024). The data on innovation patents are sourced from the China Research Data Service Platform (CNRDS) (https://www.cnrds.com) (accessed on 25 December 2024).

3.2. Measurement

3.2.1. Independent Variable

Merchant guild culture (MGC). Concerning the metrics of Weng et al. [43] and Du [55], this paper chooses the distance model to quantify the strength of MGC through the distance between the enterprise and the place of origin. Distance is not just a geographical concept; it is rich in specific information content. Different distances reflect the degree of information asymmetry. Geographical distance, therefore, significantly influences business behavior [55]. The latitude and longitude of each originating place were collected through Google Maps (https://www.google.com/maps) (accessed on 25 December 2024). Concerning Zhang et al. [21] and Wang et al. [23], the origins of the merchant guilds are identified as the following areas: Jin merchants in Pingyao and Linfen; Hui merchants for Shexian, Xiuning, Wuyuan, Qimen, Yixian, and Jixi; Shaanxi merchants for Sanyuan, Jingyang, and Suide; Lu merchants for Zhoucun; Guangdong merchants for Guangzhou, Chaozhou, Haiyang, Chenghai, Raooping, and Taipo; Fujian merchants for Quanzhou, Xiamen, and Zhangzhou; Ningbo merchant guild for Yinxian, Fenghua, Cixi, Zhenhai, Xiangshan, and Dinghai; Jiangyou merchant guild for Nanchang, Ji’an, Fuzhou, and Yichun; Longyou merchant guild for Longyou, Changshan, Quxian, Kaihua, and Jiangshan; and the Dongting merchant guild for Suzhou. The latitude and longitude of the enterprises were collected through the CSMAR database. Using Stata17 analysis software (Stata is a comprehensive statistical software package developed by StataCorp LLC. The software was sourced from College Station, TX, USA), the distance between each place of origin and the enterprise was calculated separately, and the value dis (in kilometers) with the smallest distance was chosen as an indicator of the degree to which the enterprise was influenced by the MGC. For the sake of uniformity of magnitude and to make the empirical part easier to understand, the distance between the two places is expressed in thousands of kilometers and taken as the opposite number distance. As the value of distance increases, the influence of MGC on the firm also intensifies.

Origin2022b software (Origin is developed by OriginLab Corporation. The software was sourced from Northampton, MA, USA) was used to derive Figure 1. The latitude and longitude distribution of listed firms in 2010 and 2022 can be seen in the figure, and it was found that most of the newly established firms are located around the vicinity of the origins of the merchant guilds in the southeast. The potential, internal penetration of MGC can be seen.

3.2.2. Dependent Variable

Enterprise innovation. Indicators to measure the innovation capacity of enterprises mainly include R&D investment, innovation results, organizational culture, market realization, and other perspectives to consider. This paper directly adopts the number of patent applications as a direct measure of a firm’s technological innovation output, which reflects the actual effectiveness of enterprise technological innovation. Consistent with the approaches of Xu et al. [16] and Kong et al. [56], the number of patent applications is measured in three ways: the total number of patent applications (TP), the number of invention patents (IP), and the sum of utility model and design patent applications (non-invention patents, NIP). Furthermore, respectively, plus one to take the natural logarithm. We used OP_all, OP_1, and OP_2 to measure enterprise innovation.

3.2.3. Control Variables

We select Tobinq, Roe, Big1 (percentage of shares held by the first largest shareholder), Growth (sustainable growth rate), Size, Lev (debt-to-asset ratio), Occupy (share of money owned by large shareholders), Executives (number of employees), and Fage (year of establishment of the company) as the control variables.

3.3. Model Specification

To examine the connection between MGC and corporate innovation, this paper constructs the following model.

$$Innovatio{n}_{i,t}={\alpha }_0+{\alpha }_{1}distanc{e}_{i,t}+{\alpha }_{2}Control{s}_{i,t}+Industry+Year+{\epsilon }_{i,t}.$$

(1)

In addition to the variables mentioned above, firm and year fixed effects were also included in the model. If the coefficient ${\alpha }_1$ was significantly greater than zero, Hypothesis 1 was considered supported.

4. Empirical Results and Analysis

4.1. Descriptive Statistics and Correlation Analysis

Descriptive statistics are constructed in

Table 1. Descriptive statistics.

Variable	N	Mean	SD	Min.	Median	Max.
OP_all	28,642	2.761	1.780	0	2.944	7.012
OP_1	28,642	2.005	1.599	0	1.946	6.267
OP_2	28,642	2.188	1.701	0	2.303	6.315
Distance	28,642	−0.258	0.329	−2.032	−0.128	−0.003
Tobinq	28,642	2.363	1.698	0.832	1.817	10.96
Roe	28,642	0.063	0.124	−0.521	0.069	0.362
Big1	28,642	0.341	0.148	0.864	0.319	0.745
Growth	28,642	0.045	0.105	−0.409	0.048	0.351
Size	28,642	22.390	1.335	14.942	22.204	28.6336
Lev	28,642	0.440	0.202	0.008	0.436	1.165
Occupy	28,642	−0.019	0.0419	−0.211	−0.009	0.079
Executives	28,642	1.953	0.316	0	1.946	3.714
Fage	28,642	2.944	0.323	1.099	2.996	4.174

. Among them, the minimum, maximum, mean, and standard deviation of innovation (OP_all) are 0, 7.012, 2.761, and 1.780, respectively. This suggests that, while the average innovation level of firms was low, there was significant variation among firms, indicating considerable potential for improvement. The mean value of the MGC (distance) of firms is −0.258, with the median and maximum values of −0.128 and −0.003, respectively. This suggests that most firms are generally influenced by the MGC.

In this paper, Pearson’s correlation test was conducted on the main variables. As shown in

Table 2. Correlation analysis.

	OP_All	OP _1	OP _2	Distance	Tobinq	Roe	Big1	Growth	Size	Lev	Occupy	Executives	Fage
OP_all	1
OP _1	0.909 ***	1
OP _2	0.924 ***	0.740 ***	1
Distance	0.098 ***	0.082 ***	0.092 ***	1
Tobinq	−0.045 ***	−0.035 ***	−0.054 ***	0.002	1
Roe	0.072 ***	0.068 ***	0.063 ***	0.036 ***	0.016 ***	1
Big1	0.009	−0.010 *	0.044 ***	−0.026 ***	−0.029 ***	0.096 ***	1
Growth	0.007	0.009	0.006	−0.001	0.012 **	0.237 ***	0.014 **	1
Size	0.225 ***	0.243 ***	0.226 ***	−0.018 ***	−0.040 ***	0.024 ***	0.138 ***	0.006	1
Lev	0.093 ***	0.092 ***	0.139 ***	−0.079 ***	−0.119 ***	−0.187 ***	0.049 ***	−0.014 ***	0.178 ***	1
Occupy	0.094 ***	0.082 ***	0.074 ***	0.036 ***	−0.050 ***	0.087 ***	−0.023 ***	0.011 *	0.000	−0.204 ***	1
Executives	0.162 ***	0.174 ***	0.138 ***	−0.057 ***	−0.048 ***	0.052 ***	0.000	0.003	0.104 ***	0.118 ***	0.029 ***	1
Fage	0.001	0.017 ***	0.006	−0.014 **	−0.042 ***	−0.062 ***	−0.109 ***	−0.003	0.024 ***	0.183 ***	−0.098 ***	−0.039 ***	1

Note: * p < 0.1, ** p < 0.05, *** p < 0.01.

, MGC is significantly correlated with corporate innovation at the 1% level, and this initially verified that MGC has a positive effect on enterprise innovation.

4.2. Univariate Test

Before the main regression, univariate tests were conducted [12]. The samples were grouped according to their level of strong MGC. The mean innovation outputs of weakly MGC-influenced firms are all significantly lower than the mean innovation outputs of strongly MGC-influenced firms at the 1% level in

Table 3. Univariate test.

Variables	Weak	Strong	Difference in Means
OP_all	2.640	2.806	−0.166 ***  (−8.553)
OP_1	1.935	1.999	−0.064 ***  (−3.631)
OP_2	2.055	2.235	−0.180 ***  (−9.647)

Note: *** p < 0.01.

. This result tentatively suggests that MGC has a positive effect on enterprise innovation.

4.3. Benchmark Regression Results

Table 4. MGC and enterprise innovation.

Variables	OP_All	OP _1	OP _2
Distance	0.4224 ***	0.4570 ***	0.3155 **
	(2.6156)	(2.8207)	(2.2100)
Tobinq	−0.0339 ***	−0.0252 ***	−0.0308 ***
	(−4.3745)	(−3.5026)	(−4.1427)
Roe	0.6481 **	0.5723 ***	0.4755 *
	(2.4156)	(2.6259)	(1.7262)
Big1	0.0018	0.0004	0.0028
	(0.9294)	(0.2247)	(1.5702)
Growth	−0.2798	−0.2388	−0.0885
	(−0.9372)	(−0.9939)	(−0.2857)
Size	0.0002 ***	0.0002 ***	0.0002 ***
	(3.3346)	(4.0726)	(3.0831)
Lev	0.4111 ***	0.4765 ***	0.3855 ***
	(4.1023)	(5.2692)	(3.9725)
Occupy	0.6006 ***	0.4710 ***	0.4178 **
	(3.1731)	(2.8639)	(2.3458)
Executives	0.1893 ***	0.1517 ***	0.1956 ***
	(4.2654)	(3.4970)	(4.5824)
Fage	−0.0061	0.0791	0.1490
	(−0.0351)	(0.4908)	(0.8901)
Industry/Year	Y	Y	Y
Year	Y	Y	Y
N	28,642	28,642	28,642
R2	0.209	0.182	0.193

Note: * p < 0.1, ** p < 0.05, *** p < 0.01, respectively, with heteroskedasticity-adjusted (robust) t-values in parentheses. Y means Yes. The same below.

reports the regression results of MGC and firm innovation. The results show that the more enterprises are influenced by MGC, the stronger their innovation output capacity is, especially in terms of invention patents (OP_1); that is, the enhancement of innovation quality plays a more prominent role. This supports Hypothesis 1.

4.4. Robustness Tests

4.4.1. Replacing Independent Variable

We replaced the independent variable to avoid the potential impact of historical changes and dynastic changes on culture. Drawing on Xu et al. [16], unlike the previous paper which used the distance measure between the origin of the top ten merchant guilds and the enterprises in the Ming and Qing dynasties. In this study, the more developed regions among the top ten merchant guilds from the late Qing Dynasty and early Republic of China period are selected individually. Only one region is selected for each merchant guild; the Shanxi merchant guild has Jinzhong City, the Shaanxi merchant guild has Jingyang, the Anhui merchant guild has Huizhou, the Longyou merchant guild has Longyou County, the Shandong merchant guild has Zhoucun, the Dongting merchant guild has Suzhou, the Jiangyou merchant guild has Nanchang, the Guangdong merchant guild has Guangzhou, the Fujian merchant guild has Xiamen, and the Ningbo merchant guild has Yin County. The minimum distance dis2 is recalculated to measure the degree of influence of enterprises by MGC. Again, for ease of calculation, length = −dis2/1000 (thousand kilometers). As the results in columns (1)–(3) of

Table 5. Replacing the independent variable and dependent variables.

Variables	OP_All	OP _1	OP _2	OP_Grall	OP _gr1	OP _gr2
	(1)	(2)	(3)	(4)	(5)	(6)
Length	0.3789 **	0.3480 **	0.2768 **
	(2.4346)	(2.0382)	(2.0285)
Distance				0.4546 **	0.5270 ***	0.3435 *
				(2.5446)	(2.8069)	(1.9345)
Controls	Y	Y	Y	Y	Y	Y
Industry/Year	Y	Y	Y	Y	Y	Y
N	28,642	28,642	28,642	23,673	23,673	23,673
R2	0.209	0.181	0.193	0.264	0.176	0.297

Note: * p < 0.1, ** p < 0.05, *** p < 0.01.

show, all are significantly positively correlated. The results remain solid.

4.4.2. Replacing Dependent Variable

We replaced the dependent variable to avoid enterprises deliberately overstating the number of patent applications or applying for both invention patents and utility model patents at the same time to quickly enter the market, as the application time for a utility model patent is shorter. Until the former application is given, enterprises have to give up the utility model patent that has been obtained. This leads to the number of applications becoming larger. Therefore, the number of patents granted is used to measure innovation output, including the total number of patents granted to enterprises (OP_grall), the number of invention patents granted to enterprises (OP_gr1), and the sum of patents granted to enterprises for utility model patents and design patents (OP_gr2). Due to the patent authorization relative to the patent application time being long, the data of lag one period is used. Columns (4)–(6) of Table 5 show that they are all significantly positively correlated. The results remain significant.

4.4.3. Endogeneity Tests

MGC is essentially a product of the development of Confucian culture at the business level. This paper uses the minimum distance between firms and the five historic Confucian temples, specifically the Qufu Confucius Temple, Beijing Confucius Temple Guozijian, Nanjing Fuzimiao, Hangzhou Literature Temple, and Chao Yang Literature Temple (len), as an instrumental variable in a two-stage regression. The opposite of shortest distance between the enterprise and these five origins is also chosen as an instrumental variable, length = −len/1000. The first-stage regression results in column (1) of

Table 6. Robustness tests 1.

Variables	First-Stage	Second-Stage
	Distance	OP_all	OP _1	OP _2	OP_all	OP _1	OP _2	OP_all	OP _1	OP _2
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)
Length	0.4797 ***
	(10.6337)
Distance-hat		1.0993 ***	0.9804 ***	0.9245 ***
		(3.7891)	(3.9162)	(3.3292)
Distance					0.4731 **	0.5436 ***	0.4063 **	0.4048 **	0.4479 ***	0.2874 *
					(2.3186)	(2.7202)	(1.9911)	(2.3913)	(2.6754)	(1.9095)
Controls	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y
Industry/Year	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y
N	28,642	28,642	28,642	28,642	15,157	15,157	15,157	28,642	28,642	28,642
R2	0.5547	0.2072	0.1805	0.1920	0.2157	0.1901	0.1991	0.210	0.184	0.195

Note: * p < 0.1, ** p < 0.05, *** p < 0.01.

, which shows that the regression coefficients of the instrumental variables Length and OP are positively significant, which is in line with expectations. In the second-stage regression results, shown in Table 6 column (2), (3), and (4), the signs of the main variables are consistent with the baseline regression results. The stronger the MGC is, the higher the level of firms’ innovation output is. The conclusions remain robust.

4.4.4. Propensity Score Matching (PSM)

To mitigate any possible model setting bias, this paper uses PSM for testing [12], taking the median of the intensity of the MGC (distance) as the benchmark. The sample group that is greater than the median is considered to have an intense MGC and is set as the experimental group, with a value of one. Otherwise, it is the control group, with a value of zero. Subsequently, the nearest-neighbor matching method with replacement is applied, based on the propensity scores estimated from the control variables, using a 1:1 matching ratio and a caliper range of 0.05. The propensity score is calculated using the logit model, starting with the individual having the smallest difference in propensity scores between the two groups. Finally, after matching the samples based on propensity scores, a regression is performed. The results in columns (5), (6), and (7) of Table 6 demonstrate that the hypothesis remains valid.

4.4.5. Excluding the Influence of Factors Related to the Regional Level

The MGC may be strongly correlated with regional economic development level and regional education level. It is possible that these factors, rather than the MGC, play a truly promotional role in enterprise innovation. Drawing on Xu et al. [16], to exclude potential interference, the model further controls per capita GDP (the logarithm) and the number of undergraduate and junior colleges as variables measuring regional economic and educational levels, as shown in columns (8)–(10) of Table 6. After controlling for the relevant influencing factors at the regional level, the promotional effect of MGC on enterprise innovation still exists significantly.

4.4.6. Replacement Model

Although the overall distribution of firms’ innovation output is scattered over an integer range, there is a subset of firms whose innovation output is concentrated at zero. Therefore, the sample in this paper is amenable to a truncated-tailed regression model, the Tobit model [16,57]. In this paper, the original panel regression model is changed to a Tobit model regression. Columns (1)–(3) of

Table 7. Robustness tests 2.

Variables	OP_all	OP _1	OP _2	OP_All	OP _1	OP _2	OP_all	OP _1	OP _2
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)
Distance	0.5395 ***	0.5154 ***	0.5169 ***	0.1416 ***	0.2166 ***	0.1128 **	0.4604 **	0.4721 ***	0.3537 **
	(8.8223)	(8.2666)	(7.9899)	(2.9216)	(3.1300)	(2.2321)	(2.5300)	(2.6698)	(2.1842)
Religion							0.0072 **	0.0035	0.0074 **
							(2.0718)	(0.8319)	(2.4618)
Controls	Y	Y	Y	Y	Y	Y	Y	Y	Y
Industry/Year	Y	Y	Y	Y	Y	Y	Y	Y	Y
N	28,642	28,642	28,642	28,642	28,642	28,642	28,642	28,642	28,642
R2							0.210	0.182	0.194

Note: ** p < 0.05, *** p < 0.01.

show that the estimated coefficients are all significantly positive. The results of Hypothesis 1 are proven to be robust.

Moreover, in the baseline regression, the logarithm of patent data was used. For the robustness check, we employed a panel Poisson regression model. Patent data are count variables, and traditional linear regression models may not be suitable for such data due to the discrete and non-negative nature of count variables. The panel Poisson model effectively handles these characteristics and, by accounting for individual fixed effects, controls for heterogeneity across entities, thus providing more reliable estimates. The results, as shown in columns (4)–(6) of Table 7, remain significant. This indicates that the results are robust to the model specification.

4.4.7. Exclusion of Other Cultural Factors

To control for the potential influence of other cultural factors, particularly religious culture, this study added a religious culture factor into the regression model for robustness testing. Following the approach of Wang et al. [23], this study considers the potential impact of religious belief on the results. Since religious belief has strong stability and persistence, this study uses data from the Chinese General Social Survey (CGSS) 2015 survey, with the question “What is your religious belief: non-religious, religious”, where the religious beliefs included “Taoism, Buddhism, Folk beliefs, Islam, Catholicism, Christianity, Eastern Orthodoxy, other branches of Christianity, Judaism, Hinduism, and others” (http://www.cnsda.org/index.php?r=projects/view&id=62072446) (accessed on 25 December 2024). The results presented in columns (7)–(9) of Table 7 show that after adding the religious belief control variable to the regression model, the positive correlation between MGC and corporate innovation remains, indicating that the main regression effect remains robust.

4.5. Moderating Role

4.5.1. Moderating Role Based on Social Networks

This paper embeds social networks in the study of MGC and corporate innovation. It examines the interactive effects of two different forces, MGC and social network, on corporate innovation under different location characteristics. The shareholder linkage network is chosen to measure the social network. First, shareholders, as owners of the firm, are bound to have a significant impact on the firm with their decisions. Second, compared with the CEO network and director network, the shareholder linkage network is more effective in measuring large social networks. Based on the overall network, the shareholder linkage network has its uniqueness and importance. Gu et al. [58] found that the stronger the centrality of the shareholder network, the stronger the innovation ability of the enterprise. This effect mainly comes from the ‘weak relationship’ information advantage brought by the shareholder network, which provides more non-redundant information, reduces technological and market uncertainty in the innovation process, and provides innovation resources for enterprises. Based on this, this paper constructs the shareholder network through whether the top ten shareholders of listed enterprises comprised the same shareholders or not. Using Matlab 2016a and Pajek software, eigenvector centrality (eig), mediator centrality (bet), and degree centrality (degree) were calculated by year to measure the shareholder network.

$$Innovationi,t={\alpha }_0+{\alpha }_{1}distancei,t+{\alpha }_{2}distancei,t\times networki,t+{\alpha }_{3}networki,t+{\alpha }_{4}Controlsi,t+Industry+Year+{\epsilon }_{i,t}.$$

(2)

The results in columns (1)–(9) of

Table 8. Moderating effects tests.

Variables	OP_All	OP _1	OP _2	OP_All	OP _1	OP _2	OP_All	OP _1	OP _2	OP_All	OP _1	OP _2
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)	(11)	(12)
Distance	0.3726 **	0.4130 **	0.2768 *	0.3973 **	0.4343 ***	0.2946 **	0.4187 **	0.4384 ***	0.3230 **	0.5683 ***	0.4926 ***	0.4899 ***
	(2.2836)	(2.5388)	(1.9215)	(2.4644)	(2.7010)	(2.0639)	(2.5443)	(2.6497)	(2.2337)	(3.4787)	(2.9136)	(3.3674)
Distance×Eig	4.2242 **	3.7286 **	3.2749 *
	(2.3851)	(2.5661)	(1.9274)
Eig	3.8463 ***	3.5131 ***	3.3545 ***
	(5.2865)	(5.2635)	(4.7186)
Distance×Bet				0.4680 *	0.4172 *	0.3933 *
				(1.8612)	(1.7890)	(1.6859)
Bet				0.4041 ***	0.3262 ***	0.3703 ***
				(3.5392)	(3.1214)	(3.2790)
Distance×Degree							0.0581	0.2995 *	−0.1220
							(0.2564)	(1.6490)	(−0.5368)
Degree							0.5042 ***	0.5537 ***	0.3816 ***
							(5.4569)	(6.5123)	(4.1686)
Distance×Law										−0.0254 ***	−0.0059	−0.0309 ***
										(−2.8182)	(−0.7759)	(−3.4102)
Law										−0.0032	−0.0023	−0.0007
										(−0.3485)	(−0.2782)	(−0.0770)
Controls	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y
Industry/Year	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y
N	28,642	28,642	28,642	28,642	28,642	28,642	28,642	28,642	28,642	28,642	28,642	28,642
R2	0.210	0.183	0.195	0.209	0.182	0.194	0.212	0.185	0.195	0.210	0.182	0.195

Note: * p < 0.1, ** p < 0.05, *** p < 0.01.

indicate that the role of MGC in promoting corporate innovation is stronger in firms with a high degree of centrality in the shareholder network. This result is in line with expectations.

4.5.2. Regulatory Role Based on Legal Environment

In the current context, China attaches great importance to the inheritance and development of traditional culture, while focusing on strengthening the construction of the domestic legal system. Are the roles of the informal system of MGC and the formal system of the legal environment in enterprise innovation complementary or substitutional? To verify this effect, an interaction term between MGC and legal environment (law) was introduced. The legal environment index is selected from the index of ‘the development of market intermediary organizations and the legal institutional environment’ in China’s marketization index database (https://cmi.ssap.com.cn/). Since the last year covered by the index is 2019, this paper calculated the legal environment index for 2020–2022 using the moving average growth rate of the rule of law environment index from 2017 to 2019.

$$Innovationi,t={\alpha }_0+{\alpha }_{1}distancei,t+{\alpha }_{2}distancei,t\times lawi,t+{\alpha }_{3}lawi,t+{\alpha }_{4}Controlsi,t+Industry+Year+{\epsilon }_{i,t}.$$

(3)

Columns (10)–(12) of Table 8 show that the coefficient of the cross-multiplier term is negative, indicating that the legal environment plays a substitute role for the MGC.

5. Further Discussion

5.1. Mechanism Tests

5.1.1. Test of External Influence Channels

(1) Alleviating financing constraint

To test Hypothesis 2, drawing on Hadlock et al. [59], we used the SA index to measure the financing constraints.

The SA index is negative, meaning that a larger SA value corresponds to a lower level of financing constraint for the firm. Columns (1)–(4) of

Table 9. External influence channels tests.

Variables	SA	OP_All	OP _1	OP _2	ESG	OP_All	OP _1	OP _2
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Distance	0.0425 ***	0.3718 **	0.4122 ***	0.2651 *	0.0578 *	0.4117 **	0.4469 ***	0.3067 **
	(2.7120)	(2.3030)	(2.6087)	(1.8482)	(1.6625)	(2.5552)	(2.7482)	(2.1550)
SA		1.1912 ***	1.0557 ***	1.1865 ***
		(4.6549)	(4.5582)	(4.9520)
ESG						0.2076 ***	0.1963 ***	0.1712 ***
						(7.4785)	(7.4953)	(6.2541)
Controls	Y	Y	Y	Y	Y	Y	Y	Y
Industry/Year	Y	Y	Y	Y	Y	Y	Y	Y
N	28,642	28,642	28,642	28,642	28,642	28,642	28,642	28,642
R2	0.894	0.212	0.185	0.197	0.022	0.212	0.185	0.195

Note: * p < 0.1, ** p < 0.05, *** p < 0.01.

show that MGC promotes enterprise innovation by alleviating financing constraints. Hypothesis 2 is verified.

(2) Enhancing corporate ESG performance

To verify Hypothesis 3, this paper selected the China Sino-Securities Index (CSI) ESG rating to measure the ESG performance of enterprises, which is divided into nine levels from C to AAA, respectively, assigning values from one to nine. A higher value indicates a better ESG rating. Columns (5)–(8) of Table 9 show that the MGC promotes corporate innovation by enhancing ESG performance. Hypothesis 3 is verified.

5.1.2. Tests of Internal Channels of Influence

(1) Level of Trust

To test Hypothesis 4, ‘trustworthiness by region’ (credit) was chosen [60,61]. It has been written that trust has been proven to change very slowly, as a long time will not cause the characteristics to change [60]. These data are often used in empirical analyses as an alternative to panel data studies [61]. Columns (1)–(4) of

Table 10. Internal influence channels tests.

Variables	Credit	OP _All	OP _1	OP _2	Salary	OP_All	OP _1	OP _2
	(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)
Distance	0.1142 *	0.4024 **	0.4369 ***	0.3013 **	0.5381 **	0.4123 **	0.4455 ***	0.3068 **
	(1.7797)	(2.4790)	(2.6921)	(2.1126)	(2.0646)	(2.5546)	(2.7406)	(2.1521)
Credit		0.1750 **	0.1760 **	0.1241
		(2.1115)	(2.4140)	(1.4830)
Salary						0.0207 ***	0.0236 ***	0.0178 ***
						(3.0700)	(3.7739)	(2.7404)
Controls	Y	Y	Y	Y	Y	Y	Y	Y
Industry/Year	Y	Y	Y	Y	Y	Y	Y	Y
N	28,642	28,642	28,642	28,642	28,642	28,642	28,642	28,642
R2	0.012	0.209	0.182	0.194	0.288	0.210	0.183	0.194

Note: * p < 0.1, ** p < 0.05, *** p < 0.01.

show that the culture of merchant guilds can foster enterprise innovation by increasing the level of trust within firms.

(2) Human Capital

To test Hypothesis 5, this paper uses the average compensation (salary) of corporate executives as a measure [16]. To retain talent, firms usually set reasonable and effective executive compensation to incentivize continuous innovation. Columns (5)–(8) of Table 10 show that MGC focuses on human capital and thus enhances corporate innovation. Hypothesis 5 is validated.

5.2. Heterogeneity Tests

5.2.1. Grouping Based on Risk Appetite

Different regions have different degrees of risk appetite. Cultural values directly affect the innovation willingness and behavior of innovation subjects, and have long-term stability. Therefore, this paper uses the results of the ‘If I have extra money, I will invest in risky but high-return projects’ question in the 2015 CGSS database to measure the degree of risk preference.

Table 11. Further study.

Variables	OP_all		OP _1		OP _2		OP _all		OP _1		OP _2
	Risk Appetite	Risk Aversion	Risk Appetite	Risk Aversion	Risk Appetite	Risk Aversion	Small	Large	Small	Large	Small	Large
Distance	0.4236 **	0.4916	0.5307 ***	0.3488	0.2955 *	0.3930	0.4613 ***	0.6173	0.4971 ***	0.2959	0.3332 **	0.6401
	(2.2294)	(1.4201)	(2.7489)	(1.1874)	(1.8382)	(1.1813)	(2.8575)	(0.8996)	(3.1222)	(0.4714)	(2.3237)	(1.0370)
Controls	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y
Industry/Year	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y	Y
N	13,069	15,573	13,069	15,573	13,069	15,573	20,056	8586	20,056	8586	20,056	8586
R2	0.224	0.203	0.194	0.176	0.206	0.190	0.213	0.210	0.182	0.195	0.199	0.191

Note: * p < 0.1, ** p < 0.05, *** p < 0.01.

shows that the role of MGC on business innovation is more significant in risk-favored regions.

Firms in risk-averse regions tend to be more willing to explore innovations because firms in these regions are more accepting of the risk of failure. Entrepreneurs and managers are often more willing to take risks associated with uncertainty and innovation. Firms may be more inclined to experiment with new technologies or new business models. A business community culture provides a mechanism for mutual assistance and support, offering a sharing network that can reduce uncertainty in the process of cooperation by increasing trust among members within the firm. At the same time, it facilitates innovation by helping firms to quickly access the resources and information they need during the innovation process. The culture of merchant guilds may have created a business environment with unique cultural contracts in certain regions that may be more receptive to these informal cultural contracts. Such environments provide more space and incentives for firms to innovate.

5.2.2. Grouping Based on the Impact of Foreign Culture

Under the background of the development of global economic integration, MGC and foreign cultures inevitably conflict and integrate, learn from each other, and, within this exchange of mutual learning, draw positive nutrients for continuous innovation. This paper draws on the study of Xu et al. [16] and uses the degree of openness of the city where the firm is located to measure foreign cultural impact. (When firms are located in Shanghai, Guangzhou, Shenzhen, Zhuhai, Shantou, Tianjin, Ningbo, Wenzhou, Xiamen, Fuzhou, Qinhuangdao, Yantai, Qingdao, Lianyungang, Nantong Dalian, and Hainan areas, they are defined as cities with high external cultural shocks). The impact of foreign culture shocks on the relationship between MGC and business innovation is examined. Table 11 shows that corporate innovation is more likely to be influenced by MGC when the foreign culture shock is small.

In regions where there is less impact from outside cultures, the MGC is able to maintain its traditions and stability, forming a more closed and self-sufficient social network. This cultural stability promotes deep trust and long-term cooperation among members, which makes the MGC more effective in promoting enterprise innovation. In these regions, the influence of MGC on enterprises is less likely to be disturbed by external factors. At the same time, MGC is often part of the local culture, and business owners and employees are more likely to identify with this culture and see it as a source of motivation to promote innovation. This sense of cultural identity can enhance firms’ confidence in the face of risk and uncertainty in the innovation process and drive more innovative behavior. In addition, MGC is usually based on strong social capital, especially in more closed regions where the power of social networks is more prominent. In these regions, mutual trust and mutual assistance mechanisms between firms are more solid, and through this social capital, MGC can better promote technological innovation.

6. Discussion

This study empirically examines the relationship between MGC and corporate innovation. The relevant results shown in

Table 12. Hypotheses and empirical results.

Hypothesis Number	Hypothesis Description	Support Status
H1	MGC has a positive effect on enterprise innovation.	Supported
H2	MGC promotes corporate innovation by alleviating corporate financing constraints.	Supported
H3	MGC promotes corporate innovation by enhancing corporate ESG performance.	Supported
H4	MGC focuses on corporate integrity, which in turn promotes corporate innovation.	Supported
H5	MGC focuses on human capital investment, which in turn promotes corporate innovation.	Supported

.

First, there is a significant positive correlation between MGC and innovation. This finding enriches the perspective on corporate innovation research, especially in the application of informal institutions. Currently, the literature is primarily focused on formal institutions, while research on informal institutions is relatively limited, often focusing on cultural factors such as religion, Confucian traditions, and dialects. MGC, as a unique set of moral codes and values formed by regional merchant groups, not only aligns more closely with the ethical business behavior of enterprises but also provides new empirical evidence for the influence of Eastern cultural contexts on innovation.

Second, through the examination of external and internal channel effects, this study reveals the specific mechanisms through which MGC promotes corporate innovation. MGC promotes innovation by alleviating financing constraints, enhancing ESG performance, emphasizing integrity, and prioritizing human capital. A historical examination of MGC further reveals that the formation of merchant guilds not only shaped tangible material culture but also promoted intangible spiritual culture, such as values of honesty, trustworthiness, and the importance of talent. These cultural values have become important intangible assets driving corporate innovation. Additionally, this paper innovatively reveals the impact mechanism of MGC on corporate innovation from an ESG perspective. In recent years, ESG has become an important indicator for measuring corporate social responsibility and sustainable development, aligning closely with the profit–morality philosophy of MGC, especially in terms of social responsibility and sustainability. This perspective provides a new avenue for future research, particularly in balancing corporate social and economic value to promote innovation and sustainable development.

Third, the study also finds that shareholder networks enhance the impact of MGC on corporate innovation. The broad scope of shareholder networks provides enterprises with more resources and support, further promoting innovation. At the same time, the legal environment, as a formal institution, shows a certain substitutive relationship with MGC. When the legal environment is well-developed, enterprises may rely less on MGC. Through the heterogeneity analysis, this paper further reveals that enterprises with higher risk preferences and lower external cultural shocks are more likely to be positively influenced by MGC in terms of innovation, indicating that the impact of MGC varies across different types of enterprises.

International research indicates that culture has a profound impact on corporate innovation. Different cultural contexts affect firms’ innovation strategies, behaviors, and outcomes. Studies typically focus on cultural dimensions, such as Hofstede’s individualism versus collectivism, to understand their effects on innovation. These studies show that culture not only shapes a company’s innovation thinking and behavior but also impacts the types and modes of innovation. For instance, individualistic cultures tend to favor technology-driven innovations, while collectivist cultures encourage teamwork and incremental innovation. Additionally, social capital and trust networks play a significant role in driving innovation, with cultural backgrounds influencing the formation and utilization of these networks. Moreover, different cultures also vary in their acceptance and implementation of innovation. For example, Confucian cultures in East Asia, which emphasize collectivism and long-term cooperation, tend to foster incremental innovation. In contrast, Western individualistic cultures tend to prioritize technological breakthroughs and risk-taking. In multinational enterprises, cultural differences may pose challenges to innovation management, but effective cross-cultural management can promote innovation globally. In summary, the role of culture in corporate innovation not only enriches innovation theory but also provides important insights for cross-cultural business management and international strategies.

The study of MGC in this paper, as a unique regional cultural background, demonstrates how it influences corporate innovation through moral guidelines, trust networks, and talent development mechanisms. The relationship between MGC and corporate innovation is linked to similar international studies but also presents distinct cultural differences. Specifically, there are differences in innovation-driven mechanisms between MGC and international culture, especially Western culture. Firstly, MGC is a typical collectivist culture, emphasizing cooperation and trust among members, while Western culture is more individualistic, focusing on personal independence and achievements. In MGC, innovation depends on collective wisdom and joint efforts, while Western enterprises often rely on individual leaders or technical experts to drive innovation, showcasing stronger individual-driven innovation. Secondly, MGC emphasizes incremental innovation, focusing on product quality improvement, optimizing management processes, and enhancing social responsibility, which contrasts with the technology-driven and disruptive innovation models prevalent in Western cultures. Although disruptive innovation in Western cultures is considered the main driver of corporate development, incremental innovation is still seen as the key to long-term development and stable growth in MGC.

Moreover, the concept of “righteousness and profitability” in MGC stresses social responsibility and shared benefits, which differs from Western innovation models that often focus more on economic efficiency and market-driven innovation. In MGC, innovation not only considers economic value but also emphasizes corporate social responsibility and sustainable development, with a closer connection to ESG principles. Lastly, the relationship between MGC and the legal environment also differs. In countries with well-established rule-of-law environments, the legal protection for innovation is stronger, which may reduce companies’ reliance on cultural norms. In regions with weaker legal frameworks, culture may fill the institutional gaps, further promoting corporate innovation. Therefore, the legal environment in different countries plays a critical role in shaping the influence of culture on innovation.

The significance of comparing MGC with other cultural backgrounds lies in the following concepts. First, in the context of globalization, cross-cultural comparisons help us better understand innovation patterns and mechanisms across different cultural contexts. As a unique cultural phenomenon in China, MGC offers an alternative innovation path distinct from Western cultures. By comparing MGC with other cultural backgrounds, this study not only enriches the theoretical framework of innovation research but also provides new perspectives and strategies for multinational business management. Second, the differences in innovation models across cultures, such as the technology-driven innovation in the U.S. and the incremental innovation model in China, reflect the deep influence of culture on innovation. MGC emphasizes “human-centeredness” and “relationships”, making it particularly relevant for companies that emphasize teamwork and social responsibility in their innovation processes. Through cross-cultural comparisons, researchers can uncover the potential effects and limitations of culture on innovation and offer tailored recommendations for corporate innovation practices in different countries.

7. Conclusions and Implications

7.1. Research Conclusions

The cross-fertilization of “culture and economy” is of practical significance. This study focuses on A-share listed companies from 2010 to 2022 and empirically investigates the influence of MGC on innovation. The findings reveal a positive relationship between MGC and corporate innovation. The channel effect tests find that MGC promotes corporate innovation mainly through alleviating financing constraints, enhancing ESG performance, emphasizing integrity, and human capital. The study also finds that shareholder network enhances the impact of MGC on corporate innovation. A substitution relationship exists between the legal environment, as a formal institution, and MGC. In the heterogeneity analysis, firms with risk appetite and low foreign cultural shock are more influenced by MGC. This paper verifies that the chamber of commerce culture is a kind of soft power used to enhance the economy, and has a cross-period inheritance in the process of precipitation and enrichment.

7.2. Research Implications

Based on the above research conclusions, this paper draws the following insights. First, accelerating innovation is a powerful engine to promote the high-quality development of enterprises. The promotion of enterprise innovation does not have to only rely on the role of the formal system but can also rely on an informal system, such as MGC, to guide the spontaneous innovation consciousness of enterprises. The culture of merchant guilds contains the valuable values of excellent traditional Chinese culture, which are still applicable to modern business. Second, the guiding role of the government should be improved. The government should increase the importance and publicity of traditional culture, so that merchant guild culture in modern business grows out of new vigor for traditional culture. Finally, enterprises are the main positions from which to spread traditional business culture. Enterprise culture should draw on the valuable parts of traditional culture, constructing moral codes of business that are based on faith, that are people-oriented, and that correctly view the concepts of righteousness and profit. By incorporating the essence of traditional business culture into enterprise culture, it provides strong support for the innovative capacity and sustainable development of enterprises.

7.3. Limitations and Future Research

First, this paper directly uses the number of patents listed in the CNRDS database to measure the technological innovation output capacity. In future research, the knowledge production function can be used to motivate the equation and better derive the indicators of enterprise innovation output. This leads to further measurement of the ability of enterprises to transform scientific and technological achievements, which are evaluation indicators of technological innovation activities, thus developing the research.

Second, the formation of merchant guilds was clearly geopolitical in its early years. In today’s globalized world, the geo-features of merchant guilds are very different from those in the past. Whether MGC influences the formation of corporate executives’ values is difficult to systematically depict in this paper. Therefore, in the future, representative enterprises from different merchant guilds can be selected through questionnaire surveys. The core personnel of the enterprises will be interviewed, and the measurement method of MGC will be further expanded. This is also one of the important future research directions of MGC.