How Financial Market Development Can Encourage Innovation Activity
Innovation is crucial to improving productivity and fostering sustainable growth, especially among countries that are moving toward or are at the cutting edge of technological advances (technology frontier). Innovation is usually underfinanced due...
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| Format: | Brief |
| Language: | English |
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World Bank, Malaysia
2021
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| Online Access: | http://documents.worldbank.org/curated/undefined/799771635517440050/How-Financial-Market-Development-Can-Encourage-Innovation-Activity http://hdl.handle.net/10986/36567 |
| Summary: | Innovation is crucial to improving
productivity and fostering sustainable growth, especially
among countries that are moving toward or are at the cutting
edge of technological advances (technology frontier).
Innovation is usually underfinanced due to its high
uncertainty nature and market failures caused by mismatches
in information about the value of an investment between
inventors and outside investors (information asymmetry). The
development of financial markets can reduce such frictions
and channel financing to innovation. The Brief first
examines the recent trend in innovation activities in
advanced and emerging markets economies, and then explores
the underlying mechanisms through which financial market
development may encourage innovation at both the firm and
aggregate levels. Lastly, this Brief discusses the relevant
policies that can be implemented by policy makers to boost
innovation activities. |
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