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

Reza H. Chowdhury and Min Maung

Research in International Business and Finance, 2012, vol. 26, issue 2, pages 258-272

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.

Keywords: Financial market development; R&D investment (search for similar items in EconPapers)
Date: 2012
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