Investigating the nonlinear effects of financial development on research and development in selected developing countries

Objective: Due to the structural difference in the quantity and quality of services provided in the financial markets, financial development is able to explain an important part of the difference in the level of growth and development among countries, and these changes can affect the growth of research and development components in different economic sectors. On the other hand, today the globalization of the economy is such that in an economic path, successful countries are those that can provide more production and services from fewer resources, which is not possible except through more research and development. The existence of an advanced financial system is a prelude to economic development; An efficient system that encourages savings in households and reduces investment risk for entrepreneurs. Therefore, all developed countries have an advanced financial system, and no industrial economy with a higher degree of research and development can be found without a developed financial system. Also, no poor country can be found that has an advanced financial market. Today, research and development activities are the primary and basic platform for the transition from a resource-based economy to a knowledge-based economy in the countries of the world and provide the basis for the formation of knowledge-based and research-based activities. The scientific gap between developed and developing countries is also measured based on the contribution of research and development in their various economic, social and political activities. Research and development is a key and effective element in the economy of countries. Today, research and development activities are the primary and basic platform for the transition from a resource-based economy to a knowledge-based economy in the countries of the world, and it provides the basis for the formation of knowledge-based and research-based activities. The growth in the use of R&D increases more competition in the manufacturing sectors, which has positive effects on the economy, improving product quality and variety, and improving productivity, which itself increases production. The importance of investing in research and development has been taken for granted and today it is research and development that determines the allocation of funds for financial issues and the future conditions of organizations. In the last few decades, due to the highly competitive market in the financial fields and the importance of the research and development sector in creating a competitive advantage for the providers of goods and financial services and ultimately creating a very high added value, special attention has been paid to the issue of research and development. and the methods of strengthening and improving the quality level of products and services. The importance of developing the financial system in the field of research and development is obvious. The growth of this knowledge-based sector requires the accumulation of capital, and the financial system has been formed to provide the necessary resources to finance investments. Of course, not every financial system can meet the needs of the research and development sector; Only those can do this task correctly who can align individual motivations in the direction of collective interests. A task that the financial system of developing societies is deficient in performing. The importance of developing the financial system in the field of research and development is obvious. The growth of this knowledge-based sector requires the accumulation of capital, and the financial system has been formed to provide the necessary resources to finance investments. The purpose of this research is to evaluate the nonlinear effects of financial development on research and development.



Methods: In this research, the non-linear effects of financial development on research and development in 18 selected developing countries during the period of 2006 to 2019 have been evaluated using the econometric technique of panel data with the non-linear approach of Nonlinear Auto Regressive Distributed Lag (NARDL).



Results: The results of the estimations indicate that the impact of positive shocks of financial development indicators (banking credits and the value of trading shares) on research and development is positive, but the impact of negative shocks of financial development indicators on research and development is negative.



Conclusion: Based on this, in order to increase the amount of research and development expenses, it is necessary to improve the indicators of financial development. In order to improve the indicators of financial development, it is suggested to expand the size of the banking sector as much as possible, to grant facilities based on the prioritization of projects and to monitor the way of distributing bank credits, in order to properly inject liquidity and grant more facilities, which requires the application of the opinions of financial experts. Since bank facilities cannot be responsible for research and development expenses alone, therefore, in addition to providing more facilities, the increasing prosperity of the stock market can be a financial supplement for banks to cover research and development expenses. Therefore, it seems necessary that the relevant officials in the capital market should try to improve the attractiveness of the stock market to the people through sufficient information to the society (expressing the benefits of investing in the stock market) and take the necessary measures to maintain the standards and attract use capital in this market.



Keywords: financial development, research and development, Nonlinear Auto Regressive Distributed Lag.