Financial development and innovation: Cross-country evidence

By Po-Hsuan Hsu, X. Tian, Yan Xu. 2014

1,586 citations recorded by the source corpus.

We examine how financial market development affects technological innovation. Using a large data set that includes 32 developed and emerging countries and a fixed effects identification strategy, we identify economic mechanisms through which the development of equity markets and credit markets affects technological innovation. We show that industries that are more dependent on external finance and that are more high-tech intensive exhibit a disproportionally higher innovation level in countries with better developed equity markets. However, the development of credit markets appears to discourage innovation in industries with these characteristics. Our paper provides new insights into the real effects of financial market development on the economy.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/8183c6a12b85d296793920e77e4527678da45e05

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Citations in the corpus

Managerial Risk-Taking Incentive and Firm Innovation: Evidence from FAS 123R (2018, neutral): “We use a concordance table that connects the USPTO technology classes to the 2-digit SIC codes developed in Hsu, Tian, and Xu (2014) to map patents in each technology class to one or multiple 2-digit SIC codes.”
Corporate Innovation Along the Supply Chain (2018, neutral): “…(Cornaggia et al. 2015), firm boundaries (Bena and Li 2014, Seru 2014), management compensation (Baranchuk et al. 2014), financial development (Hsu et al. 2014), governance (Chemmanur and Tian 2017), non-executive compensation (Chang et al. 2015), Brav et al. (2017), and analyst coverage (He…”
Does Banking Competition Affect Innovation (2015, background): “Hsu, Tian, and Xu (2014) find that industries that are more dependent on external finance and that are more hightech intensive exhibit a higher innovation level in countries with better developed equity markets, but the development of credit markets appears to discourage innovation in industries…”
Do Antitakeover Provisions Spur Corporate Innovation? A Regression Discontinuity Analysis (2018, neutral): “…and Howitt (2005), Hirshleifer, Low, and Teoh (2012), Cornaggia, Mao, Tian, and Wolfe (2015), He and Tian (2013), Nanda and RhodesKropf (2013), Hsu, Tian, and Xu (2014), Seru (2014), Bradley, Kim, and Tian (2017), Chu, Tian, and Wang (2018), and Gu, Mao, and Tian (2018)).5 Our paper…”
Financial Development and Industrial Pollution (2018, neutral): “This alternative data set allows us to run our tests on a sample of fewer countries (33) but more sectors (16),”
Subsidies, financial constraints and firm innovative activities in emerging economies (2017, background): “2012) and overall country financial development (Hsu et al. 2014) for R&D investment.”
The influence of corporate social responsibility on investment efficiency and innovation (2019, positive): “While the potential benefits of innovation are clear, the ability and willingness to innovate are less clear, given that the innovation process is long, full of uncertainty, and has a high probability of failure (Holmstrom 1989; Chang et al. 2015; Hsu et al. 2014).”
Does Political Corruption Impede Firm Innovation? Evidence from the United States (2019, background): “…and Wu (2017)), stakeholder protection laws (Acharya and Subramanian (2009), Acharya, Baghai, and Subramanian (2013), (2014), Brown et al. (2013), and Cerqueiro, Hegde, Penas, and Seamans (2017)), and financial development (Ayyagari, Demirgüç-Kunt, and Maksimovic (2011), Hsu et al. (2014)).”
Independent Boards and Innovation (2017, background): “Measures of originality and generality (Hall, Jaffe, and Trajtenberg 2001) are occasionally used to measure breadth and impact of innovations (see Lerner, Sorensen, and Stromberg, 2011 and Hsu, Tian, and Xu, 2014).”