Is social capital associated with corporate innovation? Evidence from publicly listed firms in the U.S

• Published in: Journal of corporate finance (Amsterdam, Netherlands) Netherlands), 2020-06, Vol.62, p.101623, Article 101623
• Main Authors: Hasan, Iftekhar, (Stan) Hoi, Chun-Keung, Wu, Qiang, Zhang, Hao
• Format: Article
• Language: English
• Subjects: Citations; Cooperation; Innovation; Social capital; Trust
• ISSN: 0929-1199; 1872-6313
• DOI: 10.1016/j.jcorpfin.2020.101623

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 relocations. 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. •Local social norms and networks are associated with innovation.•This positive association is for the U.S. listed firms at the county level.•Innovation proxies are captured by patents, citations, R&D, and trademarks.•Social capital relates to innovation through prominence of contracting channel.