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Econometric panel analysis demonstrates that financial development and human capital enhance innovation in OECD nations, highlighting non-linear effects across economies.
This paper explores the dynamic link between financial development and innovation, while accounting for human capital and institutional quality for 29 OECD countries spanning 40 years (1980-2019). The findings based on Generalized Method of Moments (GMM) and the Fully Modified Ordinary Least Squares (FMOLS) estimators show that trade, institutional quality, human capital and financial development promote innovation activities, while foreign direct investment has the opposite effect. Further, the findings show a non-linear relationship between finance and innovation.
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Atsu et al. (2023) studied this question.
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