Where Informal Institutions Lead, Innovation Follows: Role of Local Creative Culture on Bank Financial Innovation

ABSTRACT This paper examines the impact of local creative culture on bank financial innovation within the framework of informal institutional theory. Using comprehensive panel data from 2017 to 2022, we reveal that banks located in highly creative environments exhibit greater financial innovation. This relationship holds true across various bank types, including market‐focused, geographically diversified, publicly listed, and private institutions. However, it is partially limited to being observed in foreign banks. Additionally, the effect of creative culture is significantly stronger in non‐family‐controlled banks compared to family‐controlled ones. These findings highlight the importance of integrating local creative culture into organizational practices to promote financial innovation and secure competitive advantages, supporting the notion of informal institutional theory.