Relationship between financial development and intelligent transformation of manufacturing: evidence from 69 countries

Intelligent transformation is a typical feature of Industry 4.0. To investigate the causal relationship between financial development and intelligent transformation, we empirically investigate the relationship between the samples using panel data from 69 countries from 1993 to 2020, and address potential endogeneity using 2SLS regression. The results show that financial development has significant, positive, and heterogeneous effects on the intelligent transformation of manufacturing. The contributions of financial development are more pronounced in non-advanced, low levels of manufacturing technology, high manufacturing dependence, and bank-dominated economies. Finally, financial development promotes transformation through three channels: innovation, investment, and knowledge spillover effects. The findings would not only contribute to the related literature but also enable policymakers to better understand the value of financial development to the intelligent transformation of industries, especially for developing economies and economies with a high dependence on manufacturing.