Arab Journal of Administration المجلة العربية للإدارة


This study investigates the relationship between banks development and innovation at macroeconomic levels, using a sample of 19 Arab countries during the period from 1963 to 2012 and applying Ordinary Least Square (OLS) estimation. Innovation was measured by patent per capita per 1,000,000 person, while banks development was measured by domestic credit to private sectors by banks as proportion of GDP. Other control variables reflecting the education level, economic growth and openness to international trade were added. The study found evidence that innovation is influenced by an increase in the level of education and a low level by the development of banks in the Arab World, suggesting the need for enhancing the education level in the Arab world and more partnerships between public and private sectors to finance innovation. However, the study found no evidence of economic growth and openness on the innovation level in the Arab World. Future research is recommended in this area including other variables.