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Financial development and barriers to the cross-border diffusion of financial innovation

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  • Ang, James B.
  • Kumar, Sanjesh

Abstract

This paper explores the determinants of financial development by focusing on the role played by barriers to the diffusion of financial technology. These barriers are measured using human genetic distance from the technology frontier. The results based on cross-sectional data for 123 countries suggest that genetic distance to the global frontier has an economically and statistically significant effect on financial development, in that countries that are genetically far from the technology leader tend to have lower levels of financial development. Genetic distance is found to have the largest effect, even after controlling for other determinants of financial development established in the literature. These findings indicate that cultural barriers to the diffusion of financial technology across borders impact financial development by influencing the follower countries’ ability to adopt and adapt innovations from the frontier.

Suggested Citation

  • Ang, James B. & Kumar, Sanjesh, 2014. "Financial development and barriers to the cross-border diffusion of financial innovation," Journal of Banking & Finance, Elsevier, vol. 39(C), pages 43-56.
    • Handle: RePEc:eee:jbfina:v:39:y:2014:i:c:p:43-56
    DOI: 10.1016/j.jbankfin.2013.10.011
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    More about this item

    Keywords

    Financial development; Genetic distance to the frontier; Financial innovation;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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