Abstract:The paper analyzes the mechanism of financial development on technological innovation from four aspects: the function of financial system, the internal structure of banking industry, the financial ecological environment and technological innovation process. Based on the panel data of 30 provinces and cities in China, we construct a scoring system to measure technological innovation capability and compare the differences of technological innovation levels between different regions. We establish the static panel model for the whole country, eastern, central and western regions respectively, and analyze the influence of financial development on technological innovation in different regions. We found that (1) The level of financial development and technological innovation in the whole country and each region shows an rising trend.However, differences between regions exist, and the eastern region is better than the other two regions. (2) A well-developed financial system can promote technological innovation.(3) The development of the stock market is more conducive to the promotion of technological innovation than the expansion of the commercial banks. (4) The lower the degree of competition in the banking industry, the more not conducive to the improvement of technological innovation capability. (5) The improvement of the credit environment can significantly promote technological innovation. (6) The domesticfirms can not absorb the FDI effect,which is more obvious in the eastern region than in other regions.
