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Institutional quality, financial development, and economic growth: drivers of environmental innovation across emerging and advanced markets

  • 11 minutes ago
  • 2 min read

A new study by Dr. Chung Thanh Phan, HAPRI's Research Associate, and Dr. Thang Tat Vo, HAPRI's Director, together with Dr. Diem Thi Hong Vo, Dr. Quyen Minh Pham, and Dr. Huy Pham (RMIT University Vietnam), examines how institutional quality, financial development, and economic growth drive environmental innovation across emerging and advanced markets.


Climate change remains one of the most pressing global challenges, and environmental innovation is widely recognized as crucial for advancing sustainable development. While previous research has examined drivers of green innovation, most studies focus on the firm level, providing limited cross-country evidence on how governance, financial systems, and economic growth jointly influence different types of environmental technologies. This study addresses that gap by analyzing 18 countries (9 advanced and 9 emerging markets) over 1990–2020, using OECD patent data across four technology categories: environment-related technologies, environmental management technologies, climate change mitigation, and climate change adaptation.


Analytical framework and environmental innovation outcomes.
Analytical framework and environmental innovation outcomes.

Using dynamic panel models with both Difference GMM and System GMM estimators, the authors uncover pronounced heterogeneity across technology types and market contexts. The key findings include:

  • Higher regulatory quality is consistently associated with greater environmental innovation, particularly for environment-related, environmental management, and mitigation technologies in emerging countries

  • The relationship between governance and adaptation technologies is weaker and less robust across country groups, suggesting different policy mechanisms are needed for different innovation types

  • Financial institutions and financial markets display heterogeneous effects between emerging and advanced economies, highlighting the importance of context-specific financial policies

  • Results remain broadly consistent when splitting the sample into pre- and post-Paris Agreement periods, reinforcing the robustness of the findings


Keywords:

  • Environmental Innovation

  • Institutional Quality

  • Financial Development

  • Economic Growth

  • Emerging and Advanced Markets

Citation:

Vo, D.T.H., Phan, C.T., Pham, Q.M., Pham, H., & Vo, T.T. (2026). Institutional quality, financial development, and economic growth: drivers of environmental innovation across emerging and advanced markets. Research in Globalization, 12, 100347. https://doi.org/10.1016/j.resglo.2026.100347

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