Recent research highlights the significant influence of culture on financial systems and business sustainability. While the impact of culture on corporate governance and behavior is established, the effect of cultural inclusion on corporate sustainability remains unexplored. This study addresses this gap by investigating the relationship between cultural inclusion and firm sustainability in China, a country with diverse geographical cultures and a significant informal institutional influence. The authors posit that cultural inclusion, a geographical cultural characteristic reflecting acceptance of diverse cultures, can significantly impact corporate sustainability by enhancing employee well-being and improving firm total factor productivity (TFP). TFP, a comprehensive measure of firm efficiency, is increasingly used to evaluate corporate sustainability. China's diverse geoculture, shaped by historical factors, geographic features, and population movements, offers a rich context for exploring this relationship. The study uses data on Chinese listed companies and constructs a cultural inclusion index based on food culture—a crucial element of social interactions, local identity, and regional economic development. The authors hypothesize that cultural inclusion positively affects firm TFP by increasing humanistic care for employees and creating a favorable external environment for business.

Existing literature focuses on the macro-level impact of culture on national financial systems and the micro-level influence on business sustainable development. Studies have examined the effects of geoculture on corporate governance and business behavior. However, research on the direct link between geographically-based cultural inclusiveness and corporate sustainability is lacking. The concept of inclusiveness, promoting equality and well-being, is central to this study. Previous research on inclusion primarily focuses on internal corporate organizations. This study innovatively explores the impact of external environmental inclusiveness on firm sustainability, leveraging China's unique blend of evolving formal institutions and strong informal institutions (geoculture). Existing research on corporate TFP focuses on corporate characteristics and formal institutions. This study expands this literature by exploring the influence of informal institutions (geoculture) on corporate TFP.

The study uses a multi-method approach combining web scraping, text analysis, and econometric techniques. First, a web crawler gathered recipe information from a major Chinese website to quantify the taste of dishes across various regional cuisines. Seven taste dimensions were identified: spicy, sweet, salty, sour, umami, pungent, and oily. Text analysis assigned taste values to each dish component. This data formed the basis of a food taste index for each provincial administrative unit in China. Data on the location of catering establishments (PC) from Amap were used to determine the prevalence of different cuisines in each province. The cultural inclusion index ($C_{Inclu_p}$) was constructed by calculating the deviation of the province's overall taste from its local cuisine taste, averaged across the seven taste dimensions. The study also utilized a proxy variable, Out_cui, representing the share of non-local cuisines in each province. Firm-level data (2010-2019) on 2118 A-share listed companies (excluding ST, PT, financial, and real estate sectors) were obtained from CSMAR. Corporate TFP was measured using the LP-semiparametric approach. The main regression model investigated the relationship between cultural inclusion (C_Inclu) and TFP, controlling for firm characteristics (Size, LEV, BM, RET, Attention, Turnover, ROA, Top_10, Top_1, Lncom, Boardsize, Indeboard, Separation, CO_CEO, SOE) and regional control variables (GDP growth, GDP per capita, per capita consumption, population growth). To address endogeneity concerns, a two-stage least squares (2SLS) method was employed, using mountainous undulation (Moun_Undu) as an instrumental variable for cultural inclusion. A regression discontinuity design (RDD) was used, comparing Shanghai with neighboring provinces (Jiangsu and Zhejiang), to mitigate bidirectional causality. Robustness checks involved replacing the independent variable (with Out_cui and Dspicy) and dependent variable (with the OP-semiparametric TFP). Additional analysis explored the role of top managers' home region cultural inclusion and the mechanism through which cultural inclusion impacts TFP (by increasing corporate social responsibility toward employees). Finally, cross-sectional analysis examined the heterogeneous effects of cultural inclusion based on industry competition (using the Herfindahl index) and analyst attention.

The study's primary finding is a significant positive correlation between cultural inclusion and corporate TFP. This relationship holds even after controlling for various firm and regional characteristics. The 2SLS instrumental variable regression, using mountainous undulation, confirms the causal relationship, demonstrating that higher cultural inclusion leads to higher TFP. The RDD analysis, comparing Shanghai with Jiangsu and Zhejiang, further supports this causality. The study highlights the role of top managers' home region cultural inclusion in enhancing corporate sustainability. Specifically, higher cultural inclusion in the CEO's birthplace strengthens the link between local cultural inclusion and corporate sustainability. The mechanism analysis shows that cultural inclusion increases corporate social responsibility toward employees, which in turn enhances TFP. This supports the "humanistic care hypothesis." The study also reveals heterogeneous effects of cultural inclusion: the positive impact on TFP is stronger for firms in highly competitive industries and firms receiving high analyst attention. The average cultural inclusion index (C_Inclu) was 0.686, with significant regional variation. The coefficient of C_Inclu on TFP_LP ranged from 0.122 to 0.140 in the main regressions and 0.352 in the IV regression. The interaction terms for industry competition and analyst attention were also significantly positive, suggesting stronger effects in these contexts.

The findings significantly contribute to the understanding of the relationship between cultural inclusion and corporate sustainability. The study demonstrates that cultural inclusion, an informal institutional factor, positively impacts firm performance and sustainability, measured by TFP. This expands the literature on culture and finance, providing empirical evidence for the positive effect of cultural inclusion on economic outcomes. The study's findings have implications for corporate governance, investment decisions, and policy formulation. The role of top managers in transmitting cultural values and the mechanism of increased humanistic care for employees provide valuable insights into how cultural inclusion operates within firms. The heterogeneous effects highlight the importance of considering contextual factors when assessing the impact of cultural inclusion on firm sustainability.

This research provides novel evidence on the positive impact of cultural inclusion on corporate sustainability, particularly in the context of China's diverse regional cultures. The study's main contribution lies in establishing a causal relationship between cultural inclusion and improved TFP, using robust econometric techniques. Further research could explore the long-term effects of cultural inclusion, investigate the impact across different cultural contexts, and examine potential non-linear relationships between cultural inclusion and firm performance. Expanding the study to incorporate a global sample could reveal more nuanced insights into the dynamics of cultural inclusion and firm sustainability.

The study's limitations primarily concern the measurement of cultural inclusion and the geographic scope. The cultural inclusion index was constructed using data from a single year, potentially limiting its ability to capture dynamic changes over time. The focus on China's geoculture, while advantageous in its richness, restricts the generalizability of the findings to other national contexts. The reliance on a specific proxy for cultural inclusion (food culture) might not fully capture the multi-faceted nature of this concept. Future research should aim to develop more comprehensive measures of cultural inclusion and explore its implications in diverse cultural settings. The strong endogeneity challenges in cross-national research require consideration in future work.