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Innovation, Credit Constraints and National Banking Systems: A Comparison of Developing Nations

Author

Listed:
  • Edward Lorenz

    (Université Côte d'Azur, France
    GREDEG CNRS)

  • Sophie Pommet

    (Université Côte d'Azur, France
    GREDEG CNRS)

Abstract

In that paper, we seek to extend exiting micro-level studies on the financing decisions of enterprises in developing countries by explicitly connecting these decisions to firms’ innovation outcomes and to the wider institutional framework formed by the national banking system. Indeed, the national banking system is recognized as being central to the ability of developing-country firms to acquire the resources and develop the capabilities needed for innovation. We investigate the links between innovation and financial system characteristics for a sample of 36 developing nations spread across 5 regions of the world: Sub-Saharan Africa, the Middle East and North Africa, East Asia and Pacific, South Asia and Central Asia. Our results show that credit constraints have a significant negative impact on innovation and that the characteristics of the national banking system indirectly affect innovation through their impact on the likelihood that firms face these financing constraints.

Suggested Citation

  • Edward Lorenz & Sophie Pommet, 2017. "Innovation, Credit Constraints and National Banking Systems: A Comparison of Developing Nations," GREDEG Working Papers 2017-16, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.
  • Handle: RePEc:gre:wpaper:2017-16
    as

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    File URL: http://www.gredeg.cnrs.fr/working-papers/GREDEG-WP-2017-16.pdf
    File Function: First version, 2017
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    References listed on IDEAS

    as
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    Keywords

    Financing Constraints; Innovation; Banking System; Developing Nations;

    JEL classification:

    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G2 - Financial Economics - - Financial Institutions and Services

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