Kiel Working Papers, Kiel Institute for World Economics
No 1673:
Financial Development and Innovation in China: Evidence from the Provincial Data
Aoife Hanley, Wan-Hsin LIU and Andrea Vaona
Abstract: This paper investigates the role of regional financial
development, in addition to FDI, for regional innovation in China, using a
more recent provincial dataset and more sophisticated panel data estimation
techniques than previous studies. Two aspects of regional financial system
development are considered: its financial depth and government intervention
in the financial system. Estimation results show that the financial depth
of a region has a significantly positive effect on regional innovation
(patenting) performance. This positive effect is found to be higher for
minor innovations such as external design patents than for more complicated
innovations such as utility model patents and invention patents.
Surprisingly, estimation results do not show that government financial
system intervention reduces allocative efficiency of resources which would
otherwise impede regional innovation performance
Keywords: regional financial system, FDI, innovation, patent, regional study, China; (follow links to similar papers)
JEL-Codes: G20,; O30,; O53,; R10; (follow links to similar papers)
35 pages, January 2011
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