Repay hometown to promote innovation? An empirical study based on the hometown identity of senior executives

Hometowns are the origin and destination of a person. In traditional Chinese culture, the hometown has always been regarded as the root of a person. “Return to your hometown with prosperity,” “Return to your hometown with honor,” and “Return to your roots” all incisively and vividly depict the individual′s emotional attachment to the hometown, explaining the unique status of the hometown in the heart of the individual. According to social identity theory, hometown identity refers to an individual identifying with his hometown circle through the social classification of the hometown and simultaneously realizing the emotion and value given to him or her as a member of the hometown group. Existing studies show that when executives have a hometown identity, they improve the environmental governance level and environmental performance of the corporation, increase investment in the hometown, and at the same time help reduce the agency cost of the corporation and short-sighted decisions. There is no doubt that innovation plays the most decisive role in the development of corporations to maintain a long-term competitive advantage. As executives are the core of corporate innovation decision-makers and practitioners, their hometown identity is undoubtedly very important to the innovation-related decisionmaking of listed companies, regardless of the executives′ perception of the importance of innovation or their emotional attachment to their hometown. However, few studies currently focus on this. Therefore, based on the existing relevant research, we focus on the effects of the hometown identity of executives on corporate innovation and its internal mechanisms. This paper mainly contains the following two parts. In the first part, based on the theory of social identity, we analyze and discuss the internal mechanisms of hometown identity on corporate innovation from two aspects: hometown identity executives′ emotional attachment to the hometown and information and resource advantage. On the one hand, from the perspective of environmental psychology, executives with hometown identity have emotional attachment to their hometown, which will stimulate their motivation to return to and benefit their hometown and then trigger executives to promote the long-term development of their corporation and hometown with innovation. On the other hand, from the perspective of information and resource advantage, we propose that the information and resource advantage acquired by executives from the hometown circle under the hometown identity can reduce the resource constraint of innovation, thus significantly promoting corporate innovation. Therefore, all things being equal, a firm with executives who have hometown identity will have a higher level of innovation. This paper verifies this hypothesis based on the relevant data of nonfinancial A-share listed companies in Shanghai and Shenzhen from 2007 to 2018. The second part explores the effect of the clan cultural atmosphere of hometowns on their emotional attachment and the effect of corporate political connections on their access to information and resource advantages in the hometown. For the former, a strong clan cultural atmosphere of the hometown can enhance the status of the hometown in the eyes of executives, further strengthen the hometown feelings of executives, and thus improve their motivation to return to their hometown and increase the innovation level of their corporations. Political connections can help corporations obtain more information and resource advantages, alleviate the constraints on innovation activities, and thus lead executives to make more innovative decisions. The results show that a strong clan cultural atmosphere of the executives′ hometown and a high level of corporate political connections can significantly promote the positive effect of executives′ hometown identity on corporate innovation. Finally, from the perspectives of population mobility and corporate finance constraints, the empirical results show that, in a population in a flow area and financing constrained firms, executives′ hometown identity can better promote the innovation level of the corporation, verifying the mechanism of executives′ hometown identity on corporate innovation. In this paper, we have incorporated the hometown identity of executives into the research framework of corporations′ innovation decision-making and extended the research scope from the perspective of informal institutions. Based on the theory of social identity this paper discusses the internal mechanisms of hometown identity on corporate innovation from the perspectives of motivation to return home and information and resource advantage. This paper enriches the theoretical basis of the hometown identity of executives and plays a crucial role in understanding the promotion effects of executives′ hometown identity on corporate innovation. The conclusions of this paper, to some extent, support the view that executives with hometown identity establish core competitiveness through innovation activities to improve the long-term performance of corporations. This paper also provides a more targeted scientific basis for the establishment and improvement of innovation incentive mechanisms and the strengthening of corporate cohesion.