Knowledge, Technology Adoption And Financial Innovation
AbstractWhy are new financial instruments created? Why are they needed and what purpose do they serve? This paper proposes the view that financial development arises as a response to the contractual needs of emerging technologies. Exogenous technological progress generates a demand for new financial instruments in order to share risk or overcome private information, for example. A model of the dynamics of technology adoption and the evolution of financial instruments that support such adoption is presented. Early adoption may be required for financial markets to learn the technology; once learned, financial innovation boosts adoption further. An implication of the analysis is the notion that financial development promotes economic growth only to the extent that it enhances the adoption of new technologies.
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Bibliographic InfoPaper provided by CEMFI in its series Working Papers with number wp2004_0408.
Date of creation: Apr 2004
Date of revision:
Technology adoption; financial innovation; learning.;
Other versions of this item:
- Ana Fernandes, 2005. "Knowledge, Technology Adoption and Financial Innovation," Diskussionsschriften dp0513, Universitaet Bern, Departement Volkswirtschaft.
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
- O30 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-10-18 (All new papers)
- NEP-CFN-2004-10-18 (Corporate Finance)
- NEP-DEV-2004-10-18 (Development)
- NEP-ENT-2004-10-18 (Entrepreneurship)
- NEP-HIS-2004-10-18 (Business, Economic & Financial History)
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