Good credit markets and banking can drive innovation in developing economies

Published: June 27, 2018, midnight

b'Developing economies often lack sophisticated equity markets, meaning that firms that are focused on innovation must rely on bank lending. But tight bank policies can undermine the culture of innovation that is essential to growth.\\n\\nResearch conducted for the Asian Development Bank Institute concludes that deregulation creates a dynamic banking sector that, depending on the development stage, can either aid or hinder innovation.\\n\\nThe gradual deregulation of US banks over 20 years since 1970 is particularly instructive. During this period, some US banks responded to deregulation by making credit more available to out-of-state firms. Others consolidated locally by opening new regional branches.\\n\\nComparing the two patterns shows how extending credit markets aided innovation, while regional expansion generally hindered it.\\n\\nRead the transcript\\nhttps://bit.ly/2lAx1Uw\\n\\nRead the report\\nhttps://www.adb.org/publications/banking-and-innovation-review\\n\\nAbout the authors\\nChen Lin is a professor at the University of Hong Kong.\\nSibo Liu is a PhD candidate at the University of Hong Kong.\\nLai Wei is an assistant professor at Lingnan University, Hong Kong, China.\\n\\nKnow more about ADBI\\u2019s work on banking\\nhttps://bit.ly/2K8n5AH\\nhttps://bit.ly/2K8ncfB'