Abstract:

This paper investigates the impact of the senior management team’s regional cultural diversity on corporate innovation performance and the moderating effect on formal institutions from the perspective of culture, an informal system of organization. The results show that the senior management team’s regional cultural diversity has a significant role in promoting corporate innovation, mainly by restraining management’s short-sightedness, improving internal control, and alleviating financing constraints. Moreover, it presents heterogeneous characteristics under different geographical and industrial environments. Compared with inland areas and traditional industries, the regional cultural diversity of corporate executives is more likely to promote corporate innovation in enterprises in coastal areas and high-tech industries. Furthermore, the regional cultural diversity of executives, as an informal system within an enterprise, has a robust and significant substitution effect with formal systems such as social laws and government subsidies, which can effectively make up for the lack of formal institutions in promoting enterprise innovation. It can be seen that at the enterprise level, China’s regional cultural diversity is of great significance in promoting enterprise innovation in exploration and decision-making science; at the government level, the government shall face up to and make full use of our country’s unique regional culture to regulate economic development.

Key words: corporate executives, regional cultural diversity, corporate innovation, informal institutional adjustment