This study aims to examine how religion affects corporate innovation in developing countries.
Firm- and country-level indicators are used to evaluate the relationship. The study's final sample consists of manufacturing firms from 41 developing countries across different world regions from 2014 to 2018.
This paper finds that firms operating in more religiously diverse countries with lower religious restrictions are likely to be more innovative. Furthermore, secularization stimulates corporate innovation in contrast to traditional religious societies. Interestingly, results also indicate that religion hinders corporate innovation by restraining its followers’ involvement in innovative activities under risk, which downgrades corporate innovation culture.
This study used data from nonfinancial firms from developing countries; therefore, the study's findings could be generalized to other developing economies with caution, as economies operating at different stages of development can have different outcomes from the proposed relationship. The study findings are important for innovative firms, as they can take advantage by segmenting the population based on religious and atheist groups. Results also have some implications for developing countries to foster firm-level innovation through constructing effective policies and ensuring the development of diverse and free religious societies because such societal traits increase corporate innovation and are fruitful for national competitiveness and growth.
This study contributes to institutional economics and corporate innovation by exploring the link between religion and economic development through the innovation channel and analyzing the latest cross-country evidence. It is a pioneering work in empirical comparison of influence on innovations of different religions.
