International financial openness and industrial R&D

International financial integration may provide an important channel of financing for research and development (R&D) that ultimately enhances economic growth. Following the analysis of Maskus et al. (2012), we examine the impact of refined measures of international financial openness and capital controls on R&D intensities in 23 manufacturing industries in 22 OECD countries for the period 1995-2009. We interact these country-level financial measures with industry characteristics: external financial dependence and asset tangibility. Our results indicate that the significance of FDI as an international financial development measure is driven primarily by external FDI assets, perhaps indicating that multinational firms are able to access R&D funds from affiliate firms abroad. De jure measures provide corroborating evidence that financial openness may be particularly important for industries with fewer tangible assets. By contrast, the availability of international portfolio debt increases R&D intensities for those industries that rely more on external financing.