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Innovation, Information, and Financial Architecture

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  • Tadesse, Solomon

Abstract

Does a financial system architecture anchored on banks perform better than one centered on markets in fostering technological innovations as engines of growth? In a panel of industrial sectors across a large cross section of countries, I find that while market-based systems have a general positive effect on innovations in all economic sectors, bank-based systems foster more rapid technological progress in more information-intensive industrial sectors, suggesting a heterogeneous impact of financial architecture. Thus, the relative performance of bank-based systems vis-à-vis market-based systems depends on the industrial structure of the economy.

Suggested Citation

  • Tadesse, Solomon, 2006. "Innovation, Information, and Financial Architecture," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 41(04), pages 753-786, December.
  • Handle: RePEc:cup:jfinqa:v:41:y:2006:i:04:p:753-786_00
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    Cited by:

    1. Giannetti, Caterina, 2012. "Relationship lending and firm innovativeness," Journal of Empirical Finance, Elsevier, vol. 19(5), pages 762-781.
    2. Maria Aristizabal-Ramirez & Maria Camila Botero-Franco & Gustavo Canavire-Bacarreza, 2017. "Does Financial Development Promote Innovation in Developing Economies? An Empirical Analysis," Review of Development Economics, Wiley Blackwell, vol. 21(3), pages 475-496, August.
    3. Lee, Chien-Chiang & Hsieh, Meng-Fen & Yang, Shih-Jui, 2014. "The relationship between revenue diversification and bank performance: Do financial structures and financial reforms matter?," Japan and the World Economy, Elsevier, vol. 29(C), pages 18-35.

    More about this item

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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