Campus Units

Finance

Document Type

Article

Publication Version

Accepted Manuscript

Publication Date

10-1-2017

Journal or Book Title

Journal of Financial Intermediation

Volume

32

First Page

45

Last Page

59

DOI

10.1016/j.jfi.2016.07.002

Abstract

The high-tech sector accounts for the majority of corporate innovation in modern economies. In a sample of 38 countries, we document a strong positive relation between the initial size of the country's high-tech sector and subsequent rates of GDP and total factor productivity growth. We also find a strong positive connection between a country's equity (but not credit) market development and the size of its high-tech sector. Our main difference-in-differences estimates show that better developed stock markets support faster growth of innovative-intensive, high-tech industries. The main channels for this effect are higher rates of productivity and faster growth in the number of new high-tech firms. Credit market development fosters growth in industries that rely on external finance for physical capital accumulation but is unimportant for growth in innovation-intensive industries. These findings show that stock markets and credit markets play important but distinct roles in supporting economic growth. Stock markets are uniquely suited for financing technology-led growth, a particularly important concern for advanced economies.

Comments

This is an accepted manuscript of an article from Journal of Financial Intermediation, 32 (2017); 45-59. DOI: 10.1016/j.jfi.2016.07.002. Posted with permission.

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

Copyright Owner

Elsevier B.V.

Language

en

File Format

application/pdf

Available for download on Monday, October 01, 2018

Published Version

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