Does financial development catalyse biotechnology innovation? A comparative cross-country analysis between developed and developing economies

Biotechnology (BT) stands as a transformative force in economic development, yet the role of financial systems in catalysing its innovation remains insufficiently examined. In this regard, this study investigates the impact of financial development (FD) on biotechnological advancement across 51 countries from 1990 to 2020. Accounting for significant cross-sectional dependence, we employ second-generation econometric techniques, including unit root, cointegration, and cross-sectional augmented autoregressive distributed lag (CS-ARDL) approach. The estimated findings reveal that financial development exerts a positive, albeit modest, influence on biotechnological innovation. In contrast, financial globalization (FG), labour force participation (L), and research and development (RD) expenditures emerge as the most robust and elastic drivers of biotechnology innovation. Conversely, inflation (INF) exhibits a significant adverse effect, underscoring the sector’s vulnerability to macroeconomic instability. Subgroup analyses highlight pronounced asymmetries: in developed economies, financial development and RD sustain long-term BT innovation, whereas in developing nations, their impact is either transient or structurally constrained. Robustness checks and tests for bidirectional causality confirm a systemic interdependence between financial systems and biotechnological innovation, consistent with Schumpeterian and endogenous growth theories. These results yield novel insights into the heterogeneous financial and institutional prerequisites for biotechnological progress, emphasizing the need for context-specific financial policies to fully unlock its innovation potential. By elucidating the finance–innovation relationships, thus advancing scholarly discourse provides actionable policy implications for fostering biotechnology-driven growth.