National culture, institutional quality and firm R&D investment: evidence from the Asia-pacific IT industry

This paper investigates the effects of national culture and formal institutions on firm R&D investment from an institution-based perspective. Specifically, we investigate whether national culture affects the extent to which firms rely on the quality of formal institutions in making their R&D investment decisions. Using a panel of IT firms from the Asia-Pacific region, we find evidence that (1) the quality of formal institutions stimulates firm R&D after controlling for other potential determinants of R&D at firm and country level, and (2) this positive association is more pronounced for firms embedded in short-term oriented and individualistic cultures. This suggests that the impact of formal institutions on firm-level R&D may be contingent on the configuration of informal institutions in the firm’s environment. Regarding practical implications, policymakers are made aware that national culture may affect the extent to which firms respond to institutional reforms aimed at stimulating R&D investment.