European Journal of Finance

By using time-collapsed data for 12, 362 firms from 40 countries, I document that national culture is significantly associated with R&D investments, controlling for other determinants including a country’s financial development. In a more individualistic, less masculine, and more indulgent culture, firms tend to make more R&D investments. These findings are robust to alternative proxy variables for financial development and remain unchanged regardless of whether tested by instrumented two-stage least squares or fixed effects panel regressions. Culture’s impact is different depending on firm size and age. Further, its limited impact on equity issues suggests that it relates to R&D directly rather than being mediated by other financial market channels.

National culture and R&D investments