Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/190741 
Year of Publication: 
2018
Citation: 
[Journal:] Journal of Innovation & Knowledge (JIK) [ISSN:] 2444-569X [Volume:] 3 [Issue:] 3 [Publisher:] Elsevier [Place:] Amsterdam [Year:] 2018 [Pages:] 143-153
Publisher: 
Elsevier, Amsterdam
Abstract: 
This study examined the non-linear relationship between financial development and innovation using generalized method of moments (GMM) estimators for a panel data model. The sample comprised data for 75 developed and developing countries for the period 1996 to 2010. An inverted U-shaped non-linear relationship between finance and innovation was observed. This finding implies that finance enhances innovation only up to a certain level. Beyond that level, further development of finance tends to affect innovation adversely. The institution interaction term was included to examine its role in the relationship between finance and innovation. The results suggest that the finance-innovation curve varies with different settings of institutional quality. Specifically, the finance-innovation relationships followed an inverted U curve only for countries with high institutional quality. Hence, sound institutional quality is a prerequisite for financial development to benefit innovation.
Subjects: 
Innovation
Institutions
Financial development
Non-linearity
Panel data
GMM
JEL: 
O31
O43
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Article

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