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Innovation Activities and Sustainable Firm Growth in Arab Countries: The Role of Bank Funding, Institutional Quality and Bank Competition

Author

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  • Ahmed Chafai

    (University of Manouba)

  • Rym Oueslati

    (University of Tunis)

  • Hatem Salah

    (University of Manouba)

Abstract

The objective of this study is to explore the curvilinear relationship between innovation and sustainable firm growth, as well as the moderating role of bank funding on research and development (R&D), institutional quality and bank market power on this nexus. To do this, we selected a sample of 424 companies listed in ten Arab countries (Bahrain, Egypt, Jordan, Kuwait, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, and the United Arab Emirates) over the period 2010-2022. Using a systemic GMM model, the results show that there is a curvilinear (inverted U-shaped) link between innovation and sustainable firm growth. In addition, the outcome shows that bank funding on R&D, institutional quality and bank market power moderate the curvilinear nexus between innovation and sustainable firm growth. This study offers valuable insights into strategic innovation planning and elaboration of important implications by highlighting the role of bank funding on R&D, institutional quality and the power of the banking market in promoting firm sustainability.

Suggested Citation

  • Ahmed Chafai & Rym Oueslati & Hatem Salah, 2025. "Innovation Activities and Sustainable Firm Growth in Arab Countries: The Role of Bank Funding, Institutional Quality and Bank Competition," Working Papers 1819, Economic Research Forum, revised 20 Dec 2025.
    • Handle: RePEc:erg:wpaper:1819
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