As an informal institution rooted in local history, culture can exert a persistent influence on corporate behavior. Using panel data on Chinese A-share listed firms from 2009 to 2023, this study examines the effect of merchant-culture exposure on corporate green innovation and explores the underlying mechanisms. The results show that merchant-culture exposure significantly inhibits firms’ green innovation, and this finding remains robust across a wide range of additional tests. Mechanism analysis shows that merchant culture inhibits green innovation mainly by reinforcing managerial myopia and weakening managerial innovation orientation. In other words, firms exposed to stronger merchant culture are more likely to favor short-term and low-risk activities, while devoting less sustained attention to long-horizon and high-uncertainty innovation. Heterogeneity analysis further indicates that this negative effect is stronger among large firms, during the COVID-19 period, and in firms with higher levels of digitalization. Overall, the findings highlight the role of local informal institutions in shaping firms’ green innovation decisions and provide useful implications for policies aimed at promoting green transformation. • Examines merchant-culture exposure as an informal institution shaping green innovation. • Finds merchant-culture exposure significantly inhibits Chinese firms’ green innovation. • Shows inhibition operates by reinforcing managerial short-termism. • Reveals inhibition through weakened managerial innovation orientation. • Documents stronger inhibition after COVID-19 and in larger, more digitalized firms.
Li et al. (Fri,) studied this question.