Institutional Quality, Bank Finance and Technological Innovation: A way forward for Fourth Industrial Revolution in BRICS Economies

Chenguang Wang, Cuixia Qiao, Rahil Irfan Ahmed and Dervis Kirikkaleli

Technological Forecasting and Social Change, 2021, vol. 163, issue C

Abstract: The introduction of new technologies in the fourth industrial revolution (4IR) has increased the world's income by manifold. In this context, the 4IR poses unprecedented implications for the banking sector. This study investigates the effects of bank finance and institutional quality on technological innovation, in the presence of other important control variables such as high technology exports and the gross domestic product (GDP) for BRICS countries. The results of Westerlund's (2007) cointegration method show that there is a stable long-run relationship among the variables. To estimate the long-run coefficient of the explanatory variables, this study uses the CS-ARDL method. The results show that bank finance, institutional quality, high technology exports, and GDP are positively associated with technological innovation. In terms of the policy implications, this study recommends that for industries to adopt innovative technologies, large scale, illiquid capital investment is a prerequisite. Hence, access to finance should be eased, enabling firms to implement advanced technologies and undertake costly ventures of innovation. Countries with developed institutions protect their citizens' property rights and, therefore, provide a conducive environment where they are free to innovate. Therefore, BRICS countries should focus more on strengthening their institutions, in order to improve their innovation performance.

Keywords: Bank finance; BRICS countries; Fourth industrial revolution; Institution quality; Technological innovation (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:tefoso:v:163:y:2021:i:c:s0040162520312531

DOI: 10.1016/j.techfore.2020.120427

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