The Impact Of Financial Development On The Innovation Effect Of Export

This paper investigated the relationship among export, innovation and financial development. A close link between export and innovation and important roles played by an effective financial system could be detected in the analysis to the experiences of economies with high intensity of innovation such as Korea and Taiwan. Therefore, I treated this argument as the logical core through this paper that financial arrangement is the key intermediate variables in the connection between innovation and export.A summary on previous studies of three categories about innovation, export, finance and their connections was provided in this paper. Based on this summary, I developed a simple theoretical model to illustrate the relationship among financial, exports and innovation from the view of micro-mechanism. The model showed that the internal and external financial constrain faced by the enterprises would give negative impacts to enterprises’innovation and the relationship between export and innovation. Based on the micro-foundation of enterprises, this paper showed that the higher the degree of financial development, the more obvious the pushing effects from the export to the innovation. The impact of financial development is reflected not only in the improvement of overall financing facility, but also in the efficiency of the structure allocation to the financial resources which is precisely the key to explain the Chinese phenomenon of "high export, but low innovation".Based on an empirical analysis to a cross-country panel data of83countries and15years, this paper verified the hypothesis provided in the theoretical part. It showed that the higher the degree of financial development, the more obvious the positive influence from export to innovation. In other words, the export may not be able to play a role to promote innovation in the economies with a less-developed financial system. To ensure the robust of the empirical analysis, this paper simultaneously used the methods of cross-term and sub-sample regression. This paper also used cross-industry and cross-province panel data of Chinese industrial enterprises to conduct further empirical tests to the relationship among export, innovation and finance. The results provided more evidences to the micro-mechanism showed by the model.Because of the key roles of the degree of financial development to determine whether exports can gave a positive effect to innovation, this paper believed that some measures should be take to build a well-developed financial system, promote financial deepening, enhance the efficiency of allocation of financial resources and eliminate the financial discrimination to the private sectors to keep the long-term sustainable development of Chinese export oriented economy.