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Financial Development and Innovation Activity: Evidence from Selected East Asian Countries

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  • Lain-Tze Tee
  • Soo-Wah Low
  • Si-Roei Kew
  • Noor A. Ghazali

Abstract

This paper examines the role of financial development in promoting innovation-related activity using panel data for seven East Asian countries for the period from 1998-2009. On overall financial development, we find that, financial sector size and the overall activity of banks and stock market exert positive influences on patent applications. In particular, our results show that all measures of banking development are positively and significantly related to the number of patent applications after controlling for variables known to affect innovative activities. Interestingly, we find no evidence that variation in patent applications is affected by a country's stock market development. The findings suggest that banking sector plays important roles in supporting innovation activity in East Asian countries.

Suggested Citation

  • Lain-Tze Tee & Soo-Wah Low & Si-Roei Kew & Noor A. Ghazali, 2014. "Financial Development and Innovation Activity: Evidence from Selected East Asian Countries," Prague Economic Papers, Prague University of Economics and Business, vol. 2014(2), pages 162-180.
    • Handle: RePEc:prg:jnlpep:v:2014:y:2014:i:2:id:478:p:162-180
    DOI: 10.18267/j.pep.478
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    2. Yuchen Lin & Daxin Dong & Jiaxin Wang, 2021. "The Negative Impact of Uncertainty on R&D Investment: International Evidence," Sustainability, MDPI, vol. 13(5), pages 1-21, March.
    3. Tuan Doanh Le & Duong Phuong Thao Pham & Tuan Bach Le, 2019. "The Relationship Between Financial Development and Innovation: Empirical Evidence from Selected Asian Countries," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 67(1), pages 287-298.
    4. Hamza Çeştepe & Murat Çetin & Pınar Avcı & Bersu Bahtiyar, 2024. "The link between technological innovation and financial development: Evidence from selected OECD countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 1219-1235, April.
    5. Alberto Mendez-Morales & Carlos Yanes-Guerra, 2018. "Financial Systems and Private Innovation Activity. A Research for OECD Countries," Proceedings of the 11th International RAIS Conference, November 19-20, 2018 02AM, Research Association for Interdisciplinary Studies.
    6. Dejan ŽIVKOV & Jovan NJEGIĆ & Ivan MILENKOVIĆ, 2018. "Interrelationship between DAX Index and Four Largest Eastern European Stock Markets," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 88-103, September.
    7. Wang, Chenguang & Qiao, Cuixia & Ahmed, Rahil Irfan & Kirikkaleli, Dervis, 2021. "Institutional Quality, Bank Finance and Technological Innovation: A way forward for Fourth Industrial Revolution in BRICS Economies," Technological Forecasting and Social Change, Elsevier, vol. 163(C).

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    More about this item

    Keywords

    financial development; patents; banking development; stock market development; innovative activities;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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