IDEAS home Printed from https://ideas.repec.org/a/cai/jiedbu/jie_011_0231.html
   My bibliography  Save this article

Is the financial innovation destruction creative? A Schumpeterian reappraisal

Author

Listed:
  • Faruk Ülgen

Abstract

This essay examines the consequences of financial innovations for the economic stability through a monetary reappraisal of the Schumpeterian approach and states that changes occurring in financial markets may adversely affect financing conditions of firms and impede economic development. In the economic literature, it is usually asserted that liberalized financial markets lead to innovations that allow banks to provide better risk management, information acquisition, and monitoring services. Therefore financial liberalisation would support the Schumpeterian vision of creative destruction process. However, recent financial crises cast doubt on the creative nature of financial innovations on weakly regulated markets. When speculative bank behaviour gains ground, it leads to the financialisation of economies. Financial markets dominate over the productive activities and provoke disastrous consequences at the macroeconomic level. Unlike the Schumpeterian entrepreneurial innovations, the evolution of financial markets leads to reckless finance that generates destabilizing dynamics. Then the Schumpeterian creative destruction process turns out to be a destructive creation and the systemic sustainability of market economies calls for more consistent regulatory frameworks.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Faruk Ülgen, 2013. "Is the financial innovation destruction creative? A Schumpeterian reappraisal," Journal of Innovation Economics, De Boeck Université, vol. 0(1), pages 231-249.
  • Handle: RePEc:cai:jiedbu:jie_011_0231
    as

    Download full text from publisher

    File URL: http://www.cairn.info/load_pdf.php?ID_ARTICLE=JIE_011_0231
    Download Restriction: free

    File URL: http://www.cairn.info/revue-journal-of-innovation-economics-2013-1-page-231.htm
    Download Restriction: free

    Other versions of this item:

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cai:jiedbu:jie_011_0231. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jean-Baptiste de Vathaire). General contact details of provider: http://www.cairn.info/revue-journal-of-innovation-economics.htm .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.