Trust and Corporate Innovation

This paper examines the relation between the level of societal trust and corporate innovation in the worldwide. Using data on firms located in 72 countries or regions from1992 to 2016, we quantify the country trust level and find strong evidence that firms in countries with a higher level of societal trust have higher R&D investment input. We also find that the impact of societal trust on firms’ innovation behavior is more pronounced in the firms with a higher level of financial constraints and in the countries with a poor intellectual property rights protection. Overall, our results highlight the effect of societal trust in shaping enterprise innovation behavior.