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Do stock market and banking sectors development promote innovation efficiency?

Author

Listed:
  • Soo-Wah Low
  • Ali Albada
  • Nurhatiah Ahmad Chukari
  • Noor Azlan Ghazali

Abstract

Purpose - The purpose of this paper is to investigate the impacts of stock market and banking sectors development on a country’s efficiency in transforming its innovation input into output. Design/methodology/approach - This study employs a generalized method-of-moments panel estimator to examine the role of stock market and banking development in influencing innovation efficiency. Findings - Findings show that a country’s stock market development is positively related to its innovation efficiency ratio. Countries with more developed stock markets have relatively higher efficiency in transforming innovation input into innovation output than those with less developed stock markets. There is no evidence that innovation efficiency is influenced by banking sector development. However, when stock market and banking sectors are modeled together, while stock market development retains its positive influence, the findings indicate that banking sector exerts negative impact on innovation efficiency. Practical implications - The findings provide useful insights to guide policy decisions for a country’s innovation agenda in enhancing its innovation performance. The findings imply that stock market development should be embraced as one of the key policy areas in order for a country to be more efficient in transforming its innovation input into innovation output. Originality/value - This paper provides first evidence using data sourced from Global Innovation Index report, first available in 2007 and published by Cornell University, INSEAD and the World Intellectual Property Organization.

Suggested Citation

  • Soo-Wah Low & Ali Albada & Nurhatiah Ahmad Chukari & Noor Azlan Ghazali, 2018. "Do stock market and banking sectors development promote innovation efficiency?," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 14(5), pages 506-521, September.
    • Handle: RePEc:eme:ijmfpp:ijmf-02-2018-0064
    DOI: 10.1108/IJMF-02-2018-0064
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    Citations

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    Cited by:

    1. Noman Arshed & Waqas Ahmad & Uzma Hanif, 2022. "A Spatial Temporal Exploration of Factors Motivating Academia-Industry Collaboration," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(1), pages 521-540, March.
    2. Wei Qiu & Yinghua Li & Haitao Wu, 2023. "The role of direct financing on regional green development: inhibition or promotion?," Economic Change and Restructuring, Springer, vol. 56(5), pages 3665-3699, October.
    3. Peter Nderitu GITHAIGA, 2019. "Foreign Remittances, Private Sector Investment and Banking Sector Development," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 3(2), pages 85-112.

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