Dialectal Difference and Corporate Geographical Boundary Expansion
This paper uses business registration data on newly opened affiliates from between 2003 and 2015 to investigate the effects of dialectal difference between different counties in the same prefecture-level city on the geographical boundary expansion of firms.This paper uses the Poisson-Maximum likelihood regression method,the results indicate that dialectal difference significantly hinders corporate geographical boundary expansion and these results are valid after a series of robustness tests.Analysis of the mechanism reveals that dialectal difference primarily supresses the geographical boundary expansion of firms through the trust channel rather than the exchange channel.More importantly,the trust channel is more reliable,as the effects are more pronounced for expansions that are more sensitive to inter-regional trust,such as vertical geographical boundary expansion,expansion into higher skill-intensity industries and expansion into greater performance-heterogeneity industries.This work finds that the effects are more significant in smaller firms,those that are non-state owned and with less cross-regional operation experience.Based on the dialectal difference within the same country,the paper enriches the literature on the geographical boundary of firms from the perspective of informal institutions.