Although the relationship between Western religiosity and innovation is widely investigated, the effect of Eastern religious traditions on corporate innovation remains unexplored. Using a sample of firms listed in Chinese A-share stock exchanges, we find that firms registered in areas with stronger Eastern religious traditions (Buddhism and Taoism) are generally more innovative than firms registered in areas with weaker Eastern religious traditions. This result suggests that Eastern religiosity promotes rather than stifles corporate innovation. We find additional evidence suggesting that Eastern religiosity promotes corporate innovation mainly through the following three channels: (1) fostering nonexclusivity and openness to science and innovation, (2) mitigating agency conflicts, and (3) nurturing commitment and fortitude.

JEL Classifications: N35; D81; O31.

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