Financial Liberalization and Innovation
University of New South Wales (UNSW) - Institute of Global Finance, Australian School of Business
Indiana University - Kelley School of Business - Department of Finance
UNSW Australia Business School, School of Banking and Finance
University of New South Wales (UNSW) - School of Banking and Finance; Financial Research Network (FIRN)
June 1, 2014
Kelley School of Business Research Paper No. 2014-08
We investigate the impact of financial liberalization on technological innovation. Using a fixed effects identification strategy and a sample of 37 developed and emerging economies over the period between 1980 and 2009, we identify economic mechanisms through which financial liberalization affects innovation. Industries that are more dependent on external finance, have greater growth opportunities, are younger, have higher operational risk, and are more high-tech intensive have a disproportionately higher level of innovation output following financial market liberalization. The positive effects of financial liberalization on innovation are substantiated in countries with low implicit barriers to international investments. We provide new insights into the real effects of financial liberalization on the economy and growth.
Number of Pages in PDF File: 50
Keywords: innovation, financial liberalization, economic growth
JEL Classification: G15, O30, F63
Date posted: March 2, 2014 ; Last revised: August 26, 2014
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