| Abstract | In this paper, trust culture is embedded in the framework of innovation decision-making. Based on neo-institutional economics theory, following a “culture-behavior” paradigm, this paper examines the effect of trust culture on firm innovation, as well as the interaction effect of trust culture and formal incentive institution on innovation. The conclusions are as follows. Firstly, the results show that the culture of trust has a positive effect on innovation. Compared with their peers, there is a 8.56% increase in innovation for firms with trust culture orientation, which is equivalent of 1.089 more patent applications on average, Secondly, pay gap and trust culture have a complementary effect on firm innovation, and enhance the trust culture and innovation between the company's positive correlation. Besides, internal pay gap and trust culture also play a complementary role in promoting firm innovation, and the interaction with the trust culture when the company's innovation to promote the role of stronger. This paper not only examines the effect of culture on innovation and enriches literature, but also has important implications in the enforcement of firm innovation strategy. It is also helpful to improve national soft power, to promote the creative transformation of traditional culture, and innovative development. |