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Financial market development and the effectiveness of R&D investment: Evidence from developed and emerging countries

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  • Chowdhury, Reza H.
  • Maung, Min

Abstract

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.

Suggested Citation

  • Chowdhury, Reza H. & Maung, Min, 2012. "Financial market development and the effectiveness of R&D investment: Evidence from developed and emerging countries," Research in International Business and Finance, Elsevier, vol. 26(2), pages 258-272.
    • Handle: RePEc:eee:riibaf:v:26:y:2012:i:2:p:258-272
    DOI: 10.1016/j.ribaf.2011.12.003
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