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Firm Innovation in Emerging Markets: The Roles of Governance and Finance

56 Pages Posted: 20 Apr 2016  

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business

Meghana Ayyagari

George Washington University - School of Business

Asli Demirgüç-Kunt

World Bank - Development Research Group; World Bank

Date Written: March 1, 2007

Abstract

The authors investigate the determinants of firm innovation in over 19,000 firms across 47 developing economies. They define the innovation process broadly, to include not only core innovation such as the introduction of new products and new technologies, but also other types of activities that promote knowledge transfers and adapt production processes. The authors find that more innovative firms are large exporting firms characterized by private ownership, highly educated managers with mid-level managerial experience, and access to external finance. In contrast, firms that do not innovate much are typically state-owned firms without foreign competitors. The identity of the controlling shareholder seems to be particularly important for core innovation, with those private firms whose controlling shareholder is a financial institution being the least innovative. While the use of external finance is associated with greater innovation by all private firms, it does not make state-owned firms more innovative. Financing from foreign banks is associated with higher levels of innovation compared with financing from domestic banks.

Keywords: Education for Development (superceded), Microfinance, Small Scale Enterprise, Investment and Investment Climate, Innovation

Suggested Citation

Maksimovic, Vojislav and Ayyagari, Meghana and Demirgüç-Kunt, Asli, Firm Innovation in Emerging Markets: The Roles of Governance and Finance (March 1, 2007). World Bank Policy Research Working Paper No. 4157. Available at SSRN: https://ssrn.com/abstract=969234

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business ( email )

Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)

HOME PAGE: http://www.rhsmith.umd.edu/finance/vmax/

Meghana Ayyagari (Contact Author)

George Washington University - School of Business ( email )

Washington, DC 20052
United States

Asli Demirgüç-Kunt

World Bank - Development Research Group ( email )

United States
202-473-7479 (Phone)
202-522-1155 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/ademirguckunt/

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

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