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Understanding financial innovation systems: Veblen and Minsky at the periphery

  • Solange Gomes Leonel

    (Cedeplar Centro de Desenvolvimento e Planejamento Regional Face, UFMG)

  • Sylvia Ferreira Marques

    (Federal University of Minas Gerais)

  • Ester Carneiro do Couto Santos

    (Federal University of Minas Gerais)

  • Marco Flávio da Cunha Resende

    (Universidade Federal de Minas Gerais-UFMG)

Setting off from an Evolutionary perspective, this paper debates key aspects of the process of financing innovation based on Keynes's asset choice model within the context of Minsky's cycle and the Institutionalist approach of Veblen. Innovative activity is surrounded by great uncertainty because firms invest funds for the long term without being sure whether they will earn high returns. As a result, firms run into additional obstacles when trying to obtain financing to develop new technologies. This difference becomes clearer when developed countries (USA) and less-developed countries (Brazil) are compared. The higher the level of uncertainty in world markets, the lower the amount of funds available to finance innovation; and this situation is accentuated in less-developed countries because they do not have a mature financial system capable of supporting innovation risks.

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Article provided by Edward Elgar Publishing in its journal European Journal of Economics and Economic Policies: Intervention.

Volume (Year): 10 (2013)
Issue (Month): 1 ()
Pages: 93-105

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Handle: RePEc:elg:ejeepi:v:10:y:2013:i:1:p93-105
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  1. Caprio, Gerard, Jr & Demirguc-Kunt, Asli, 1998. "The Role of Long-Term Finance: Theory and Evidence," World Bank Research Observer, World Bank Group, vol. 13(2), pages 171-89, August.
  2. Veblen, Thorstein, 1909. "The Limitations of Marginal Utility," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 17.
  3. Marco Flávio da Cunha Resende & Daniela Almeida Raposo Torres, 2008. "National innovation system, competitiveness and economic growth," Textos para Discussão Cedeplar-UFMG td325, Cedeplar, Universidade Federal de Minas Gerais.
  4. Sheila C. Dow, 1993. "Money And The Economic Process," Books, Edward Elgar Publishing, number 147.
  5. Robert E. Carpenter & Bruce C. Petersen, 2002. "Capital Market Imperfections, High-Tech Investment, and New Equity Financing," Economic Journal, Royal Economic Society, vol. 112(477), pages F54-F72, February.
  6. Thorstein Veblen, 1909. "The Limitations of Marginal Utility," Journal of Political Economy, University of Chicago Press, vol. 17, pages 620.
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