Financial systems, innovation and economic performance

Block, Thorsten (2002). Financial systems, innovation and economic performance. UNU-MERIT Research Memoranda. UNU-MERIT.

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  • Sub-type Working paper
    Author Block, Thorsten
    Title Financial systems, innovation and economic performance
    Series Title UNU-MERIT Research Memoranda
    Volume/Issue No. 11
    Publication Date 2002
    Publisher UNU-MERIT
    Language eng
    Abstract There is growing evidence of international divergence in the performance of new industries. While the United States is at the forefront of the recent revolution in information technologies, European economists and policy makers are concerned that Europe is falling behind with negative implications for long-term economic performance. This paper investigates the role of financial systems as a crucial determinant of apparent differences in national abilities to promote innovative activities in specific sectors. Firstly, a short overview of the relevant finance and innovation literature is provided, and a synthetic view of the finance-innovation link is sketched. It is argued that national financial systems have an impact on the structure of growth through their differing abilities to promote innovation in sector-specific technology regimes. Secondly, I apply a simple econometric model to a data set consisting of 17 OECD countries and 20 manufacturing industries to identify empirical patterns. The evidence suggests that sectors characterized by high technological opportunity and a focus on product innovation perform relatively better in financial systems with large stock markets, competitive banking sectors and good accounting standards. In contrast, the performance of sectors geared towards innovation in processes benefits from a more bank-oriented financial system and concentrated ownership structures.
    Copyright Year 2002
    Copyright type All rights reserved
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    Created: Fri, 13 Dec 2013, 12:42:41 JST