The Role of Innovation Development in Advancing Green Finance

Aleksy Kwilinski (), Oleksii Lyulyov and Tetyana Pimonenko
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Aleksy Kwilinski: Institute for Sustainable Development and International Relations, WSB University, 41-300 Dabrowa Gornicza, Poland
Oleksii Lyulyov: Institute for Sustainable Development and International Relations, WSB University, 41-300 Dabrowa Gornicza, Poland
Tetyana Pimonenko: Institute for Sustainable Development and International Relations, WSB University, 41-300 Dabrowa Gornicza, Poland

JRFM, 2025, vol. 18, issue 3, 1-26

Abstract: This study aims to investigate how innovation development drives green finance in the Visegrad countries by analyzing the role of R&D investments, high-tech trade, and patent activity in attracting greenfield investments. Using a vector autoregression (VAR) model with data from 2007 to 2022, this study employs forecasting techniques, impulse response functions, and variance decomposition analyses to assess the dynamic relationship between innovation and green financial flows. The findings reveal that R&D expenditures are the strongest driver of green investments, explaining over 93% of the variance in Poland and Hungary. High-tech trade significantly influences investment trends, contributing up to 84% of the variance in the Czech Republic, while patent applications initially boost greenfield investments but show diminishing returns over time. Although innovation-driven investments remain stable overall, the impact of trade and patents varies across countries, reflecting regional differences. This study identifies key challenges, such as commercialization gaps and policy disparities, highlighting the need for targeted financial and innovation policies. To sustain green finance growth, policymakers should expand R&D funding, strengthen trade infrastructure, and enhance intellectual property commercialization. Additionally, financial institutions and investors should play a more active role in developing green investment markets to support long-term economic resilience and sustainability.

Keywords: innovation; green investment; sustainable development; green growth; green development (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2025
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