This paper is to summarize the literature on finance-innovation link and produce evidence thatthe development of banking sector in Russia is to foster innovation process. Financeinnovationlink is a new and scarcely covered issue. Nevertheless it is conventional wisdomthat stock market institutions are preferable for financing innovation. But researchers claimthat in the developing countries banking institution together with thorough government policycan foster innovations. Also they claim that stock market institutions are more suitable forfinancing breakthrough innovations, while banks are more suitable for incrementalinnovations. The main contribution of this paper is that is was empirically shown using paneldata models that banks can facilitate innovation in Russia.
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