Culture and Trade: How Confucian Clan Facilitates Exports of Chinese Private Enterprises

Abstract

Domestic institutions can be a source of comparative advantage. This paper examines the role of Confucian clan culture, a long-standing institution at the heart of Chinese society, in firm exports. Using a nationally representative survey on private enterprises in China, we find that firms located in counties with historically stronger clan culture are more likely to engage in export activity and export a larger volume. There is also evidence that local clan density has a significant impact on the choice of export mode. Employing the mechanism analysis and excluding alternative explanations, we find that clans promote firm exports mainly through its role as an internal financial market in alleviating financial constraints facing firms. Further analysis shows that this promotion effect is larger when market supporting institutions are less developed, suggesting that clan culture may act as a substitute for formal institutions.

Keywords: Clan, Firm exports, Financial constraints, China

JEL Classification: F14, G32, P33, Z13