Prague Economic Papers 2014, 23(2):162-180 | DOI: 10.18267/j.pep.478

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

Lain-Tze Tee, Soo-Wah Low, Si-Roei Kew, Noor A. Ghazali
The National University of Malaysia, 436 UKM Bangi, Selangor (swlow@ukm.edu.my).

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.

Keywords: financial development, patents, banking development, stock market development, innovative activities
JEL classification: G10, G15, G20

Published: January 1, 2014  Show citation

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Tee, L., Low, S., Kew, S., & Ghazali, N.A. (2014). Financial Development and Innovation Activity: Evidence from Selected East Asian Countries. Prague Economic Papers, 23(2), 162-180. doi: 10.18267/j.pep.478
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