Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
1003590 | Research in International Business and Finance | 2012 | 15 Pages |
Does financial market development enhance the effectiveness of R&D investment in an economy? To address this question, we apply three distinct approaches including (i) ordinary least square method, (ii) cross-country instrumental variable regression approach, and (iii) panel regression method. By using a dataset of both developed and emerging countries, we find that financial market development significantly contributes to the effectiveness of total R&D investment. This finding remains robust across different model specifications and individual estimation methods. Our finding provides an important guidance to policy makers in implementing a sound financial environment that can facilitate the total contribution of R&D investment.
► Financial market development improves the effectiveness of R&D investment. ► We use country-level data of both emerging and developed countries. ► The result is robust across different model specifications and estimation methods. ► This finding is important for policymakers to ensure a sound financial environment.