Introduction

Corporate social responsibility (CSR), as an important corporate management behavior, is highly valued by the government and society (Ali et al. 2023; Ali et al. 2017; Wang and Juslin, 2011). However, the majority of the existing research on the influencing factors of CSR focuses on corporate characteristics and formal institutions, neglecting the informal factors at the geographical level (Gillan et al. 2021). In recent years, many firms around the world have experienced major problems in various aspects of food safety and environmental hygiene, especially in China (Chen and Wan, 2020). For instance, in the production process of pickled cabbage by Chaqi Group (http://www.chaqigroup.com/), there were outrageously unsanitary practices where workers stepped on pickled cabbage wearing slippers or even barefoot, and disposed of cigarette butts in pickled cabbage pits. What’s even more alarming is that these pickles were never sterilized or undergo hygiene testing before being sold to the market and purchased by consumers. A similar situation can be found in Shineway Group (http://www.shuanghui.net/). In Shineway’s pork-processing workshops, the workers were wearing substandard protective clothing as they packaged the pork that has fallen on the ground, and then distributed it to stores nationwide. These behaviors lack the sense of social responsibility, negatively affect the relationship between firms and stakeholders, causing great harm to the sustainable development of firms. Such phenomena also reflect the shortcomings of formal institutions such as laws and regulations enacted and enforced by the government, prompting scholars to consider whether informal institutions, such as culture can affect the performance of CSR.

According to the theory of institutional economics, firm behaviors are restricted by formal institutions, but are also subtly influenced by informal institutions such as culture and religion (North, 1991). This article aimed to study the impact of cultural inclusivity—an informal institution—on CSR. Since the introduction of cultural factors into the field of finance, the view has been confirmed by numerous studies that geographical culture profoundly affects the strategic development, governance behavior and operational strategies of firms (Chen et al. 2014; Guiso et al. 2009; Lei et al. 2022; Sun et al. 2023). Therefore, cultural inclusivity, as an important cultural factor, may play a major role when making governance decisions in firms.

Existing studies have supported the notion that inclusivity is of great importance at the organizational level (Shore et al. 2011, 2018; Lee and Kramer, 2016). As for the inclusivity of an organization, Shore et al. (2011) defined it as the degree of respect perceived by an individual from the organization, which is embodied in the sense of belonging felt by an individual and how the organization accept his or her uniqueness. Meanwhile, inclusivity at the geographical level refers to how people respect or accept other individuals or things that do not align with their own lifestyles or patterns of behaviors (Levine et al. 2005). Cultural inclusivity can also be observed through a region’s embrace of foreign cultures, indicating how different customs, values, religious beliefs, and other aspects of exotic cultures are understood and appreciated by the local community (Algan et al. 2016; Lowes et al. 2015). In sum, cultural inclusivity is grounded in a framework of pluralistic values within the territory that honors diverse perspectives of groups and individuals. Cultural inclusivity provides opportunities for both socially marginalized and non-marginalized groups as well as individuals within geographic areas to be their authentic selves and to strive to participate fully in serving society at all levels (Shore et al. 2018; Sun et al. 2023).

Existing studies showed that firm management would be affected by local culture, thus showing obvious regional cultural characteristics in the process of action and value concept, which is further reflected in organizational planning, decision-making and governance of firms (Chen et al. 2014; Guiso et al. 2006; Lei et al. 2022; Sun et al. 2023). Therefore, affected by the cultural inclusivity of the local region, the management of firms may show more tolerance, respect and other humanistic spirits. The organizational planning and governance behaviors of firms may also show more prosocial characteristics. Based on this, this paper examined how cultural inclusivity impacts CSR behavior, thus maintaining the sustainable development of firms.

Given its unique social and cultural atmosphere, China offers an ideal setting to our research. This country has a long history along with its typical Confucian culture and clan culture. Therefore, compared with other countries, formal institutions such as laws and regulations are less restrictive in the concepts of Chinese people. On the contrary, informal institutions hold significant sway in Chinese society and have a strong binding force on firm behaviors, complementing formal institutions (Allen et al. 2005). In addition, China’s vast areas and diverse natural geography contribute to its complex population characteristics and varied folk customs, leading to the emergence of unique geographical cultures. In turn, geographical culture influences the individuals and groups in the region to a great extent, fundamentally changing the preferences and attitudes of individuals, resulting in significant differences in behavior and decision-making among individuals, which are further reflected in corporate governance behaviors (Guiso et al. 2006). In all, China presents an ideal scenario for exploring the influence of informal institutions on CSR (Lei et al. 2022).

This study utilized a sample of A-share listed firms in China to investigate whether cultural inclusivity motivates local companies to prioritize stakeholder interests and assume more social responsibility toward shareholders, employees, consumers, and the environment. Moreover, we conducted an analysis to examine whether cultural inclusivity has varying impacts on large firms, state-owned firms and firms with a more independent board. Additionally, a mechanism analysis was performed to test whether cultural inclusivity can enhance CSR behavior by promoting the ideas of “gender equality” and restraining the notions of “power gap” within the region. This study further confirmed the robustness of the empirical findings by utilizing alternative indicators and dual fixed effects.

It is a common practice to use exogenous shocks at the geographic level to alleviate endogenous concerns (Lei et al. 2022). Previous research has suggested that the increased intricacy of the terrain facilitates the historical partitioning of regions into smaller and more isolated areas, thereby creating obstacles for migration and increasing population fragmentation. Consequently, the transmission of culture across different regions becomes more arduous, impeding the development of cultural inclusivity (Lei et al. 2022; Sun et al. 2023). Therefore, we used relief amplitude as an instrumental variable to address potential endogeneity issues, thus proving a causal relationship between cultural inclusivity and CSR.

In comparison to prior studies, this paper offers several potential contributions. First, this paper enhances the understanding of the correlation between geographical culture and corporate governance. Currently, research on the influence of geographical culture on firms has primarily centered around dialects, religion, and Confucianism (Callen and Fang, 2015; Chen, 2013; Du, 2015; Lei et al. 2022). However, this study examines how cultural inclusivity impacts corporate governance, thereby expanding the scope of the investigation. In addition, the results of this study bolster the micro-level foundation of the influence of informal institutions on CSR. Prior studies on the determinants of CSR have predominantly focused on corporate characteristics and formal institutions (Gillan et al. 2021), while this research delves into how informal institutions impact CSR from a cultural and geographic perspective at the micro level. As such, it broadens the understanding of the relationship between informal institutions and CSR. Furthermore, this study delves deeper into the internal mechanisms underlying how cultural inclusivity impacts CSR. The empirical findings suggest that the expression of humanistic care and environmental awareness by firms, along with the regional concepts of “gender equality”, “power gap”, and “performance orientation”, serve as pathways through which cultural inclusivity influences CSR. Finally, this research examines the impact of informal institutions on CSR across various geographical locations using cultural inclusivity as a lens, offering a novel perspective for both theoretical and practical domains, which contributes to the facilitation of economic growth and policymaking in relevant contexts.

The remainder of this article is structured as follows. Section 2 presents the literature review and formulates the hypotheses. Section 3 outlines the data sources and primary variables employed in this study. Section 4 presents the empirical findings regarding the relationship between cultural inclusivity and CSR. In section 5, we delve deeper into the underlying mechanisms and examine potential heterogeneities. Finally, Section 6 concludes with a discussion of the implications of our research and offers concluding remarks.

Literature review and theoretical analysis

Literature review

With the progress of the economy, there has been an increased focus on the impact of corporate activities on society. Scholars have centered their research on CSR, which has become a prominent area of study (Chava, 2014; Ghoul et al. 2016). One of the main aspects explored by academics is the factors that influence CSR. As a result, there is a growing body of literature in this field, which can be categorized into two main categories (Ali et al. 2023; Ali et al. 2017; Gillan et al. 2021).

A significant body of literature exists that discusses the influence of various firm-level factors or board characteristics on CSR. Scholars have recognized the importance of factors such as firm size and financial status in determining the extent to which CSR is fulfilled (Campbell, 2007; Chih et al. 2010; Knox et al. 2005; Moussu and Ohana, 2016; Orlitzky et al. 2003; Udayasankar, 2008). Additionally, recent research has examined the impact of executive characteristics on CSR, given the pivotal role of company executives in strategic decision-making and implementation (Borghesi et al. 2014). For example, Tang et al. (2015) concluded that CEO hubris hampers CSR implementation. Garde Sanchez et al. (2017) conducted a comprehensive analysis of various managerial characteristics, including age, gender, and CSR education profiles, and their influence on CSR information disclosure. Furthermore, there has been extensive research examining the correlation between board characteristics and CSR. The literature consistently supports the notion that board diversity, encompassing diverse directors, gender diversity, tenure diversity, and expertise diversity, can positively impact CSR (Fernandez-Gago et al. 2018; Harjoto et al. 2015; Katmon et al. 2017; McGuinness et al. 2017; Seto-Pamies, 2015; Yasser et al. 2017). In addition, the abilities and experience of board members exert significant influence on CSR, notably in terms of their educational background, the existence of specialized CSR committees, and the proportion of directors with international experience (Fuente et al. 2017; Katmon et al. 2017; Lau et al. 2016). Moreover, independent directors can assist firms in fulfilling their social responsibilities, particularly in firms with higher equity capital cost and lower proprietary costs (Garcia-Sanchez and Martinez-Ferrero, 2017).

Recent scholarly research has placed significant emphasis on the application of institutional theory in understanding corporate behavior. Within this context, the influence of the institutional environment on CSR has garnered considerable academic attention, with a specific focus on legal provisions, political regulations, and government institutions (Cai et al. 2016). For instance, Di Giuli and Kostovetsky (2014) discovered that firms operating within democratic states tend to exhibit superior CSR performance. Amor-Esteban et al. (2017) highlighted the influence of diverse legal systems on CSR practices at the national level. Jain and Jamali (2016) conducted a comprehensive review of how formal institutions shape CSR practices. Furthermore, Ali and Frynas (2018) examined the role of normative institutions that promote CSR in stimulating CSR activities within developing countries.

In general, existing research primarily examines the factors that drive CSR from both internal and external institutional perspectives, with a predominant focus on formal institutions (Ali et al. 2023; Ali et al. 2017; Gillan et al. 2021). However, there is a dearth of literature exploring the impact of informal institutions, such as cultural inclusivity, on CSR. In order to bridge this research gap, we aim to investigate the influence of the cultural inclusivity environment in which firms operate on CSR. We propose hypotheses to examine the relationship between cultural inclusivity and CSR among Chinese-listed companies, and empirically test these hypotheses.

Theoretical framework and development of hypothesis

Cultural inclusivity and CSR: based on Institutional Economics Theory

Institutional economics theory is a branch of economics theory, emphasizing the shaping role of institutional rules, arrangements, and environments on economic behavior and market outcomes (North, 1991). The core idea of institutional economics is that economic behavior is not only driven by individual rational choices but also constrained by social and institutional environments (Guiso et al. 2006; Guiso et al. 2009; Chen et al. 2014; Lei et al. 2022; Sun et al. 2023). Institutional rules include laws, regulations, contracts, customs, and social norms, which govern the rules and limitations of interaction among economic agents (North, 1991; Sun et al. 2023). These rules and limitations affect the allocation of resources, the operation mechanism of the market, and the behavioral strategies of economic participants.

Many studies based on institutional economics explore how local culture influences business development. According to institutional economics, culture, as an important informal institution, can have a homogenizing influence on individuals in a local context and further regulate corporate behavior (Chen et al. 2014; Lei et al. 2022; Sun et al. 2023). In the past, a major mainstream research approach to culture and finance was to set the research scenario based on national boundaries to discuss the impact of national cultural environments on the local finance (Holmes et al. 2013; Li et al. 2013). However, a major drawback of this research method is the difficulty in eliminating the influence of cross-country institutional differences, leading to endogeneity issues (Guiso et al. 2006; Guiso et al. 2009; Sun et al. 2023). Furthermore, cross-national research on culture can only identify culture at a macro level and is difficult to clarify the micro mechanisms of cultural effects (Chen et al. 2014; Lei et al. 2022).

To avoid the omission of variables typically associated with cross-national research, a major mainstream research approach is to set the research scenario within a single country to explore the cultural impact based on regional differences within the country (Chen et al. 2014; Lei et al. 2022; Guiso et al. 2009). Compared to Western countries with more developed economic institutions, China has a profound traditional cultural background (Lei et al. 2022; Sun et al. 2023). This cultural factor complements formal institutions and has a profound impact on social transformation and capital market operations. Moreover, due to significant geographical differences across China, there are substantial variations in social norms in different regions, which trigger exogenous cultural transfers and help identify the impact of geographic culture on enterprises (Allen et al. 2005; Sun et al. 2023).

Therefore, as an important aspect of geographical culture, cultural inclusivity may have great effect on CSR. According to the theory of institutional economics, although cultural inclusivity is an external informal institution (North, 1991), it can have a homogeneous effect on the internal management of firms. Influenced by the inclusive local culture, businesses are able to respect and embrace cultural differences and diversity of individuals, thus placing importance on the diverse needs of different stakeholders. At the same time, the inclusive cultural background of the locality can also help businesses establish good relationships with local residents and communities, increasing their connection with society and enhancing social acceptance. This, in turn, helps businesses build a reputable brand image (Sun et al. 2023). The establishment of such positive public relations plays an important role when businesses seek government support because governments often consider a company’s contribution to society and its responsible behavior. Consequently, within the context of cultural inclusivity, businesses are more likely to recognize the importance of assuming social responsibility, realizing that they need to go beyond economic objectives and also fulfill their social responsibilities. This enables them to better meet the needs and expectations of stakeholders and establish long-term and stable cooperative relationships (Ali et al. 2023; Ali et al. 2017; Gillan et al. 2021). From the above discussion, we propose the following hypothesis:

Hypothesis 1: Local cultural inclusivity promotes firms to take on more CSR.

Cultural inclusivity and CSR: perspective of gender equality

In addition to influencing internal governance and corporate social responsibility, territorial cultural inclusiveness can also affect the external environment of a company. By promoting the formation of more equal and inclusive informal institutions, it can impact a company’s social responsibility. Cultural inclusivity emphasizes respecting and including individuals from different cultural backgrounds, beliefs, languages, and lifestyles (Shore et al. 2011). It is one of the important factors for maintaining social harmony and progress at the national or regional level (Sun et al. 2023).

The concept of gender equality is an important aspect of modern society and civilization (Stoet and Geary, 2018). Achieving gender equality is a social virtue that is built upon respecting human rights, democracy, and equality (Chung and Van Der Lippe, 2020). Territorial cultural inclusivity can promote the popularization of gender equality values in local communities and fundamentally enhance a company’s sense of social responsibility (Shore et al. 2018; Shore et al. 2011; Sun et al. 2023).

In a society with territorial cultural inclusivity, women have more opportunities to participate in decision-making processes within companies. Numerous studies have shown that due to physiological and psychological differences, women tend to display more empathy and consideration for stakeholders’ perspectives in decision-making processes (Gillan et al. 2021). They are also more likely to establish good relationships with employees, clients, and other stakeholders (Manner, 2010).

Respect and acceptance of different individuals through cultural inclusivity can promote fairness within a community, reduce gender discrimination, and enable women to participate more in business management (Sun et al. 2023). When women hold more decision-making positions, they tend to consider overall interests and multiple factors such as empathy, social welfare, and environmental protection (Liao et al. 2018). Women’s innate characteristics make them more concerned about social welfare and environmental issues, thus possessing a stronger sense of social responsibility (McGuinness et al. 2017).

Therefore, when women occupy more decision-making positions within a company, there will be a stronger awareness of corporate social responsibility. Female executives pay more attention to employee rights and welfare, as well as the company’s contributions to society and the environment (McGuinness et al. 2017). This can include encouraging employees to participate in social voluntary activities, mandating sustainable development responsibilities in business operations, and improving employee welfare and benefits (Ali et al. 2023; Ali et al. 2017). These measures will encourage companies to integrate more into local society and culture, enhance their sense of social responsibility, and achieve positive interactions between businesses and society (Gillan et al. 2021). In a society with territorial cultural inclusivity, the widespread dissemination of gender equality values can be better achieved, and the awareness and power of women can be fully tapped, thereby promoting greater participation of women in corporate decision-making and increasing corporate social responsibility (Adams and Funk, 2012). This mutually reinforcing phenomenon can strengthen individuals’ and companies’ sense of social responsibility while also promoting social harmony and progress. On the basis of these considerations, the following hypothesis is proposed.

Hypothesis 2: Cultural inclusivity can improve CSR by strengthening the concept of regional gender equality.

Cultural inclusivity and CSR: perspective of power gap

The concept of “power gap” in regional areas is a social belief that recognizes unequal social classes (Zhao et al. 2015). This belief may lead people to focus more on their own interests and disregard the needs of others, resulting in social injustice and inequality (Guan and Pourjalali, 2010). This not only threatens social justice but also poses challenges to corporate social responsibility. In recent years, numerous studies have shown that greater inclusivity within organizations can significantly suppress the occurrence of inequality (Leslie and Flynn, 2022). Therefore, regional cultural inclusivity should be able to suppress the concept of power gap in regional areas, as it helps to establish a more inclusive and open social environment. Such an environment allows individuals to go beyond self-interest. Through this approach, people can better understand and respect the cultures of other regions, reducing the impression of a power gap concept in their minds (Sun et al. 2023).

Additionally, cultural inclusivity can promote communication and collaboration between different regions, enhancing social cohesion and a sense of common goals (Shore et al. 2018; Shore et al. 2011). These aspects can reduce the level of acceptance of the power gap concept among individuals, driving society towards greater fairness and equality. By suppressing the concept of power gap in regional areas, it is possible to promote better understanding and respect for the diversity of regions and cultures by corporations. If companies only focus on their own interests, they may overlook the cultural backgrounds and needs of other stakeholders, which could lead to unwise decisions that harm their own and societal interests (Ferrell et al. 2016; Gillan et al. 2021). Cultural inclusivity, by suppressing the concept of power gap in regional areas, helps companies better comprehend the cultural backgrounds and needs of stakeholders, make more reasonable business decisions, and also respect social diversity and fairness (Lei et al. 2022; Sun et al. 2023). Furthermore, by suppressing the internal power gap concept in regional areas, companies can establish broader social connections. Cultural inclusivity helps break down class inequalities within regions, giving companies the opportunity to understand and actively participate in social affairs in other areas, such as donations and voluntary services (Leslie and Flynn, 2022). This enables companies to establish better connections with various sectors of society, increase social value, expand their influence, and enhance public recognition and trust in the company (Gond et al. 2017; Rupp and Mallory, 2015). Based on these points, it can be inferred that regional cultural inclusivity may suppress the acceptance of intra-regional inequalities among members (i.e., the “power gap” concept), thereby promoting corporate social responsibility. Hence, we propose the following hypothesis.

Hypothesis 3: Cultural inclusivity can improve CSR by inhibiting the concept of regional “power gap”.

Data, variable construction and methodology

Data and variable construction

In this paper, the dependent variable, CSR, denoted the CSR undertaking of listed firms, and the main independent variable was cultural inclusivity. The data of the professional CSR evaluation system Hexun.com (https://www.hexun.com/) was adopted to measure CSR behavior of Chinese listed firms, and the CSR data of RKS (Rankins CSR Ratings) was used to test the robustness of our results (Long et al. 2020; Su, 2019). We referenced Sun et al. (2023) to construct a cultural inclusivity index based on dietary culture. Sun et al. (2023) quantified the taste data of Chinese cuisine and the taste data at the provincial level, and quantified the geographic cultural inclusivity index by calculating the deviation of dietary tastes. They demonstrated the importance of dietary culture from natural, social, and cultural attributes, indicating that diet is a necessity in human society and plays an important role in maintaining interpersonal relationships, representing local cultural connotations, as well as promoting local sustainable economic development processes (Cook, 2006, 2008; Cook et al. 2011; Li et al. 2021; Khan and Kalra, 2022; Sun et al. 2022; Sun et al. 2023). Therefore, the inclusivity of dietary culture can serve as a good proxy variable for cultural inclusivity. Moreover, the locals exhibit strong resistance to external dietary cultures in order to prevent assimilation (Chang et al. 2010; Cook, 2006, 2008; Cook et al. 2011; Karababa and Ger, 2011; Sun et al. 2023). Thus, Sun et al. (2023) conducted mathematical methods for standardizing variables commonly used to measure cultural inclusivity based on the degree of deviation of local dietary tastes from local cuisine. We also referenced Sun et al. (2023) to use the proportion of non-local cuisines (for example, in Guangdong Province, the proportion of cuisines other than “Guangdong cuisine” is used) as an alternate variable (Out_diet) for cultural inclusivity.

We collected data related to natural disasters from the China Economic and Social Big Data Research Platform (https://data.cnki.net/), and collected data related to geographic development from the National Bureau of Statistics. We based on CSMAR (China Stock Market and Accounting Research), which is the most widely used database, to obtain financial data. Our main variables used in this study and their definitions are presented in Table 1.

Table 1 Variable definition.
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We also controlled the industry (Ind) and year (Year) fixed effects to further solve the endogeneity problem, and used the dual clustering robust standard errors at the firm and year levels in all models. Moreover, all variables were winsorized at the 1% level (the results were robust for using this threshold) to avoid extreme values. The final sample included data from 10140 year-firm observations and 2118 firms from 30 provinces in China (excluding Hainan, Hong Kong, Macao, and Taiwan) between 2010 and 2019, using A-share data and excluding ST, PT, financial, and real estate industry data (Su, 2019).

Methodology

To investigate the relationship between cultural inclusivity and CSR, the main regression was specified as follows:

$$CSR_{i,p,t} = \alpha + \beta CI_{p,t} + \gamma Control_{i,p,t - 1} + {\it{\epsilon }}_{i,p,t}$$
(1)

CSRi,p,t represents the CSR indicator of firm i located in province p in year t, while CIp,t reflects the cultural inclusivity index of province p. The control variables, denoted as Controli,p,t-1, are included with a one-year lag to account for any possible time lags in their effects.

To address endogeneity concerns, we consulted the studies conducted by Lei et al. (2022) and Sun et al. (2023). We utilized the relief amplitude data of the region (Ream) measured by Feng et al. (2008) and conducted an instrumental variable test to examine its impact on cultural inclusivity. The correlation between Ream and cultural inclusivity is significant due to the challenging nature of human interactions caused by complex interlocking mountainous terrain at the geographic level. Deeper human interactions are a prerequisite for fostering inclusion, as highlighted by Sun et al. (2023). Additionally, regions with more intricate topography tend to be historically divided into smaller, relatively closed-off areas, making migration more difficult and resulting in a fragmented population. This division impedes cross-regional cultural transmission and increases the likelihood of xenophobic ideas developing in closed areas (Lei et al. 2022; Sun et al. 2023). Generally, a higher relief amplitude may hinder the formation of cultural inclusivity. It is important to note that relief amplitude is purely a natural geographic phenomenon resulting from natural evolution and is not influenced by CSR. Hence, it serves as an exogenous instrumental variable for studying cultural inclusivity (Lei et al. 2022; Sun et al. 2023).

The two-stage least square method was then applied based on this instrumental variable of relief amplitude:

$$CI_{p,t} = a + b \times IV_{p,t} + r \times Control_{i,p,t - 1} + \delta _{p,t}$$
(2)
$$CSR_{i,p,t} = \alpha + \beta \widehat{{{{{\mathrm{C}}}}I}}_{p,t} + \gamma Control_{i,p,t - 1} + {\it{\epsilon }}_{i,p,t}$$
(3)

In the Eq. (2), the instrumental variable is represented by IVp,t which is the relief amplitude data of the region. The fitted value of cultural inclusivity calculated by the first stage is represented by \(\widehat{{CI}}_{p,t}\), while the other indicators have been previously described.

To analyse the underlying external influence mechanisms, we employed a two-stage least square method (Griffin et al. 2021). In the first stage (Eq. (4)), mediator (Medp,t) was regressed against cultural inclusivity (CI) with predicted values derived from the model. Then, in the second stage (Eq. (5)), we used the predicted values (CI_Mdp,t) to regress our dependent variable (CSR).

$$Med_{p,t} = a + b \times CI_{p,t} + r \times Control_{i,p,t - 1} + \delta _{p,t}$$
(4)
$$CSR_{i,p,t} = \alpha + \beta CI\_Md_{p,t} + \gamma Control_{i,p,t - 1} + {\it{\epsilon }}_{i,p,t}$$
(5)

Results

Data Summary

The summary statistics in Table 2 show the distribution of the main variable. On average, the CI was 0.686 and the standard deviation was 0.319, suggesting significant differences in inclusivity among geographical areas. In addition, the mean value of CSR for the main dependent variable was 26.487, with a significant cross-sectional change (standard deviation is 16.729), highlighting differences in the CSR undertaking of different firms.

Table 2 Data summary.
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Baseline regression

The results of the study, presented in Table 3, confirm the hypothesis that cultural inclusivity promotes the social responsibility of local firms. In column (1), the main regression results of CI and CSR indicate a significant positive correlation between the two variables. Specifically, a 1% standard deviation increase in cultural inclusivity is associated with a 1.56 standard deviation increase in CSR. Column (2) examines the relationship between cultural inclusivity and CSR using Out_diet as an alternative variable of cultural inclusivity. The results show that using an alternative variable does not change the outcome: cultural inclusivity has a positive impact on CSR. These findings underscore the significance of cultural inclusivity in business operations in China.

Table 3 The Influence of Cultural Inclusivity on CSR.
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To further investigate how CSR is influenced by cultural inclusivity, the CSR index from Hexun.com was divided into five sub-indicators: corporate responsibility to shareholders (CSR_stock), employees (CSR_emp), consumers (CSR_cus), environment (CSR_env) and society (CSR_social). The dependent variable in the main regression was replaced with these sub-indicators in columns (3)-(7). The results demonstrate that cultural inclusivity can affect the corporate responsibility of firms to shareholders, employees, consumers, and the environment, respectively. However, column (7) indicates that cultural inclusivity has little effect on the corporate responsibility of firms to society. In summary, the primary impact of cultural inclusivity on firms is to enhance their humanistic care towards stakeholders such as shareholders, employees, and consumers, and to increase their environmental awareness. Taken together, these findings support the hypothesis that cultural inclusivity can improve CSR.

Endogeneity issue: instrumental variable method

Table 4 reports the results of the IV analysis. Columns (1) and (2) provide the results of the first and second stages, respectively. The findings indicate that Re_am significantly weakens cultural inclusivity in the first stage. However, in the second stage, instrumented cultural inclusivity promotes CSR with statistical significance.

Table 4 Cultural Inclusivity and CSR: Instrumental Variable Method.
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Columns (3) to (4) were utilized to test the robustness of the IV regression using Out_diet as the instrumental variable, and similar results were obtained. These findings, in conjunction with the outcomes of columns (1) and (2), provide further support for the causal link between cultural inclusivity and CSR.

Robust test: substitution of independent variable

In this section, a new proxy variable of cultural inclusivity was introduced to further enhance the robustness of the results. According to prior research, art-performance work has unique characteristics, requiring the acceptance, respect, and inclusion of individuals and their environment (Mellander and Florida, 2011). This suggests that regions with a higher number of artists may exhibit greater levels of cultural inclusivity. Therefore, the number of regional arts performing groups (Art_group) was utilized as a measure of cultural inclusivity. The corresponding findings are presented in Table 5. Column (1) demonstrates the relationship between Art_group and CSR, while columns (2)-(5) explore the linkage between Art_group and various sub-indicators of CSR. These results align with the previous findings, highlighting the role of cultural inclusivity in promoting socially responsible behavior among local firms.

Table 5 The Influence of Cultural Inclusivity on CSR (Alternate Independent Variable).
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Robust test: substitution of dependent variable

To ensure the reliability of our CSR measurements, we employed two methods. Firstly, we utilized the CSR rankings on Hexun.com (https://www.hexun.com/) and assigned a variable, CSRR, a value of 5 for rank A, 4 for rank B, 3 for rank C, 2 for rank D, and 1 for rank E. Secondly, we also used CSR data from the Rankins CSR Ratings (RKS) database spanning from 2010 to 2018 to further validate our findings (CSRL). To eliminate potential deviations in outcomes arising from sample limitations, we assigned a value of 0 for firms that did not disclose their social responsibility reports (Jia, 2020; Wang et al. 2020). We then re-ran the regressions using CSRR and CSRL as independent variables, and the results are presented in Table 6. The findings consistently displayed a positive correlation between cultural inclusivity and CSR, and the research conclusion remains unchanged.

Table 6 The Influence of Cultural Inclusivity on CSR (Substitution of Dependent Variable).
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Further analysis: the external influence of cultural inclusivity

In this section, we delve deeper into the external impact of cultural inclusivity. The idea of “gender equality” refers to the degree to which society combats gender discrimination, a factor that can promote social equality and encourage firms to eliminate gender-based biases (Zhao et al. 2015). As a result, women may have increased opportunities to participate in the operations and management of firms, leading to a greater tendency to prioritize stakeholder interests and promote social responsibility (Adams and Funk, 2012). Therefore, we hypothesize that cultural inclusivity, which embodies respect and acceptance towards diverse individuals, may reinforce the notion of “gender equality” within a given region.

Additionally, we investigated the connection between cultural inclusivity and the concepts of “power gap”. “Power gap” denotes the recognition and acceptance of uneven power distributions (Zhao et al. 2015). The acceptance of inequality among social members may result in firms and stakeholders becoming complacent with the status quo and decreasing their willingness to undertake social responsibility (Guan and Pourjalali, 2010). However, cultural inclusivity - with its emphasis on respecting and accepting individuals with different backgrounds - may restrain the “power gap” concept, ultimately leading to an enhancement of CSR.

Zhao et al. (2015) utilized questionnaires to measure and disclose the “gender equality” (Ge) and “power gap” (Pg) indices of various regions across China. Building on this framework, we used these three indicators as mediators to examine their relationship with both cultural inclusivity and CSR. To analyse the underlying external influence mechanisms, we employed a two-stage least square method (Griffin et al. 2021). In the first stage, each mediator (Ge and Pg) was regressed against cultural inclusivity (CI) with predicted values derived from the model. Then, in the second stage, we used the predicted values to regress our dependent variable (CSR). The empirical results of the mechanism test are presented in Table 7.

Table 7 External Influence of Cultural Inclusivity.
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The results of “gender equality” mechanism are presented in columns (1)-(2) in Table 7, where Ge is used as a mediator. The findings reveal that geographic regions with greater cultural inclusivity demonstrate a stronger tendency towards gender equality, as evidenced in column (1). Moreover, column (2) shows a significantly positive correlation between Ge - as fitted by cultural inclusivity - and CSR. Similar results were obtained for columns (3)-(4), where Pg was employed as mediators. These outcomes suggest that cultural inclusivity can encourage firms to undertake social responsibilities by promoting the regional concept of “gender equality” while also curbing the notions of “power gap”. Overall, the results confirmed hypotheses 2-3.

Heterogeneity of cultural inclusivity

The impact of cultural inclusivity on CSR may vary depending on the type of firm, and the cost of corporate governance can differ as well. This section focuses on exploring the heterogeneity of cultural inclusivity’s effects on CSR through three lenses: firm size, property rights, and board independence.

Firms may differ in their approach to CSR based on their scale (Banerjee, 2001). Large firms tend to attract more social scrutiny and face greater public pressure (Lepoutre and Heene, 2006), making them more susceptible to the influence of cultural inclusivity. Additionally, large firms typically have more resources and financing options, allowing them to undertake social responsibility initiatives while maintaining their development (Ali et al. 2017). Furthermore, according to social identity theory, larger firms are more incentivized and equipped to demonstrate greater CSR practices as a means of attracting top talent (Lange and Washburn, 2015). As such, cultural inclusivity may have a stronger impact on larger firms. In order to explore this heterogeneity, we introduced a dummy variable (Scale) that equated to 1 for firms with a size larger than the median, otherwise 0. We added an interaction term (CI_Sca) between cultural inclusivity (CI) and the firm size dummy variable (Scale) to our baseline model. The results, shown in columns (1) and (2) of Table 8, indicate that cultural inclusivity has heterogeneous effects on firm size (with a positive coefficient for CI_Sca at a significance level of 1%). Specifically, cultural inclusivity has a greater impact on the CSR of larger firms.

Table 8 External Influence of Cultural Inclusivity.
Full size table

Cultural inclusivity may also have a varying impact on firms depending on their property rights. Unlike typical competitive firms, state-owned enterprises (SOEs) have a broader range of public welfare and social responsibility goals. Moreover, the lower levels of work pressure and higher job satisfaction reported by employees of SOEs suggest a more humanistic approach to management within these firms (Tang et al. 2021). As such, it is feasible that SOEs may be more receptive to external cultural inclusivity and exhibit more inclusive behaviors towards stakeholders. Building on this notion, we hypothesize that cultural inclusivity may have a more substantial impact on the CSR of SOEs. To explore this heterogeneity, we introduced an interaction term (CI_SOE) between cultural inclusivity (CI) and SOE into the main regression. The results, shown in columns (3) and (4) of Table 8, indicate that cultural inclusivity significantly affects state-owned firms (with a significantly positive coefficient for CI_SOE at a significance level of 1%), thereby confirming our conjecture.

Previous studies have suggested that independent directors can enhance board functions, thereby strengthening governance decision oversight (Balsmeier et al. 2017; Knyazeva et al. 2013). Consequently, when making CSR decisions, more attention is typically given to maintaining the relationship between firms and stakeholders (Jizi et al. 2014). Given their potential character traits influenced by cultural inclusivity, independent directors may display a greater inclination towards inclusivity and encourage firms to adopt more inclusive behaviors in relation to stakeholders, ultimately promoting greater adherence to social responsibilities. Thus, cultural inclusivity may have a stronger impact on firms with higher levels of board independence. To test this heterogeneity, we employed a dummy variable (Inde) to represent firms with board independence greater than the median, with those below the median assigned an Inde value of 0. Furthermore, we introduced an interaction term (CI_Inde) between cultural inclusivity (CI) and the board independence dummy variable (Inde) into our baseline model. The results, shown in columns (5) and (6) of Table 8, indicate that cultural inclusivity has varying effects on firms with differing levels of board independence (with a positive coefficient for CI_Inde at a significance level of 5%). Therefore, our hypothesis is supported, indicating that cultural inclusivity has a stronger positive impact on firms with greater board independence in terms of CSR.

Discussion and conclusion

Discussion and suggestion

Currently, more studies are increasingly focusing on how CSR interacts with the internal dynamics of organizations, and there is a growing call for academia to examine the development of CSR from a human-centric and humanitarian perspective (Gond et al., 2017; Rupp and Mallory, 2015). Our research aligns with this line of thinking and further expands on this research approach. As described earlier, existing studies on the antecedents and influencing factors of CSR have primarily focused on formal institutions and internal organizational characteristics (Ali et al. 2023; Ali, et al. 2017; Gillan et al. 2021). Internal organizational characteristics include financial activities, executive personality traits, unique aspects at the organizational level and so on (Gillan et al. 2021). However, our study explores how cultural inclusivity, as a social norm originating from external informal institutions, influences CSR. The impact brought by cultural inclusivity partly aligns with the principles of human-centric and humanitarian approaches (Sun et al. 2023). Nonetheless, on a deeper level, the regional-level cultural inclusivity may result in greater organizational inclusivity based on institutional theory (Chen et al. 2014; Lei et al. 2022; North, 1991; Sun et al. 2023), thus positively impacting CSR. Our research responds to the existing literature on the interaction between CSR and organizations, and distinguishes itself from previous studies by taking an external perspective of organizations as well as delving deeper into the influence of informal institutions on CSR. It fills the gap in existing literature regarding the impact of external environmental inclusivity on organizational management behavior.

This paper represents a valuable addition to previous CSR research, which has primarily focused on corporate characteristics and formal institutions (Ali et al. 2023; Ali et al. 2017; Gillan et al. 2021). The core finding of this study is that cultural inclusivity plays a substantial role in promoting local CSR among firms. These results have important implications for institutional economics, illustrating how cultural inclusivity can have a far-reaching impact that fosters a greater emphasis on social responsibility among companies. Additionally, this study encourages further investigation into the factors influencing CSR, as it has a significant impact on corporate sustainability and ultimately translates to the societal level.

This study is the first to establish a link between cultural inclusivity and the promotion of CSR, providing valuable insights for corporate stakeholders, investors and state regulators alike. For a firm’s stakeholders, this research demonstrates that a culture of inclusivity can facilitate stronger ties between the firm and its stakeholders. In light of these findings, stakeholders, including customers and suppliers, should take into account the geographically inclusive environment in which the firm operates when forming business partnerships. Similarly, investors and creditors can utilize information on regional inclusivity to evaluate a firm’s sustainability practices. For state regulators, the results of this study suggest that firms in less inclusive regions tend to lag behind in terms of social responsibility. As such, we recommend that state regulators implement policies promoting inclusivity in these regions to encourage firms to prioritize the well-being of their stakeholders. We hope that these inclusive policies will lead to sustainable corporate development and ultimately foster sustainable social progress.

As scholars increasingly recognize the significant impact of informal institutions, including culture, on corporate governance (Chen et al. 2014; Guiso et al. 2006, 2009; Lei et al. 2022; Sun et al. 2023), research on external drivers of CSR is shifting from formal to informal institutions as an emerging trend (Chen and Wan, 2020; Su, 2019). This study represents an initial step in exploring geographical culture, an important element of informal institutions, as a driver of CSR. In the future, scholars can undertake deeper investigations into the antecedents and consequences of cultural inclusivity, such as how it is formed, and its broader cultural, economic, and social implications beyond the realm of business.

Conclusion

In this study, we investigated the impact and channels through which cultural inclusivity influences CSR. Chinese listed firms were chosen as the research sample, given China’s vast geographical expanse and abundance of natural resources that have contributed to the formation of diverse geographical cultures. The presence of unique geographic conditions and local customs across China has given rise to a wide range of cultural inclusivity. To measure cultural inclusivity, we developed a dietary taste deviation index and discovered that companies operating in regions where cultural inclusivity is highly regarded tend to prioritize CSR initiatives that demonstrate greater concern for human welfare and environmental preservation. These empirical findings held true even after we employed double-clustering robust standard errors at the firm-year levels and adjusted for industry-year fixed effects. Additionally, we conducted further tests by using proxies for both cultural inclusivity and CSR to ensure the robustness of the results.

To address any potential endogeneity issues, we employed the relief amplitude as an instrumental variable. Our findings using this technique suggest a causal relationship between cultural inclusivity and CSR. Furthermore, we demonstrated that cultural inclusivity can motivate companies to take on greater social responsibilities by promoting the regional concept of “gender equality” and hindering the notions of “power gap”. In addition, our research reveals that cultural inclusivity has divergent effects on firms of varying sizes, property rights, and levels of board independence.

In summary, our research contributes new evidence on the impact of geography-based culture on corporate activities, providing valuable normative implications. Specifically, this study is the first to investigate the influence of cultural inclusivity on corporate governance, highlighting the essential role that inclusive cultural values play in commercial economic activities. These findings underscore the fundamental impact of culture on economic sustainability.