Is Social Capital Associated with Corporate Innovation? Evidence from Publicly Listed Firms in the U.S.

60 Pages Posted: 20 Apr 2020

See all articles by Iftekhar Hasan

Iftekhar Hasan

Fordham University ; Bank of Finland; University of Sydney

Chun Keung (Stan) Hoi

Rochester Institute of Technology (RIT) - Department of Accounting and Finance

Qiang Wu

Rensselaer Polytechnic Institute (RPI) - Lally School of Management

Hao Zhang

Rochester Institute of Technology (RIT) - Saunders College of Business

Date Written: March 26, 2020

Abstract

We find that social capital in U.S. counties, as captured by strength of social norms and density of social networks, is positively associated with innovation of firms headquartered in the county, as captured by patents and citations. This relation is robust in fixed-effect regressions, instrumental variable regressions with a Bartik instrument, propensity score matching regressions, and a difference-in-differences design that isolates the effects of over time variations in social capital due to corporate headquarter re-locations. Strength of social norms plays a more dominant role than density of social networks in producing these empirical regularities. Cross-sectional evidence indicates the prominence of the contracting channel through which social capital relates to innovation. Additionally, we find that social capital is also positively associated with trademarks and effectiveness of corporate R&D expenditures.

Keywords: Social Capital; Trust; Cooperation; Innovation; Patents; Citations

JEL Classification: O31; Z13

Suggested Citation

Hasan, Iftekhar and Hoi, Chun Keung (Stan) and Wu, Qiang and Zhang, Hao, Is Social Capital Associated with Corporate Innovation? Evidence from Publicly Listed Firms in the U.S. (March 26, 2020). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3562030 or http://dx.doi.org/10.2139/ssrn.3562030

Iftekhar Hasan

Fordham University ( email )

45 COLUMBUS AVENUE
GBA-5TH FLOOR
NEW YORK, NY 10023
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia

Chun Keung (Stan) Hoi

Rochester Institute of Technology (RIT) - Department of Accounting and Finance ( email )

Saunders College of Business
105 Lomb Memorial Drive
Rochester, NY 14623-5608
United States
585-475-2718 (Phone)
585-475-6920 (Fax)

Qiang Wu

Rensselaer Polytechnic Institute (RPI) - Lally School of Management ( email )

110 8th St
Troy, NY 12180
United States
518-276-3338 (Phone)
518-276-8661 (Fax)

Hao Zhang (Contact Author)

Rochester Institute of Technology (RIT) - Saunders College of Business ( email )

105 Lomb Memorial Dr.
Rochester, NY 14623
United States

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