Innovation And Finance: The Theoretical Links
The economic literature shows that the relationship between innovation and finance has a bilateral nature. From one standpoint, financial systems influence innovative activity by exerting their functions through the different components of their structure. From another standpoint, technological innovation impacts on financial systems’ performances and requires the emergence of specific funding solutions. This paper investigates analytically these connections. The results indicate that efficient financial systems can promote innovation by selecting the most valid entrepreneurial initiatives, evaluating their potential earnings and allowing agents to diversify the associated risks. At the same time, different financial structures can determine divergences across countries with respect to their innovative achievements at the sectoral level. It is also found that the resource allocation problem for technological innovation can be mitigated by both the evolution of I.C.T., which decreases information and transaction costs, and the use of venture capital contracts, which reduces asymmetric information and moral hazard problems.
Volume (Year): XVIII (2006)
Issue (Month): 1 ()
|Contact details of provider:|| Postal: Viale Romania 32 - 00197 Roma|
Phone: 06 85225.550
Fax: 06 85225.973
Web page: http://ricerca.economiaefinanza.luiss.it/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716.
- Benabou Roland, 1993.
"Search Market Equilibrium, Bilateral Heterogeneity, and Repeat Purchases,"
Journal of Economic Theory,
Elsevier, vol. 60(1), pages 140-158, June.
- Benabou, Roland, 1988. "Search market equilibrium bilateral heterogeneity and repeat purchases," CEPREMAP Working Papers (Couverture Orange) 8806, CEPREMAP.
- Kyle Bagwell & Garey Ramey & Daniel F. Spulber, 1997.
"Dynamic Retail Price and Investment Competition,"
RAND Journal of Economics,
The RAND Corporation, vol. 28(2), pages 207-227, Summer.
- Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
- Joseph L. Gastwirth, 1976. "On Probabilistic Models of Consumer Search for Information," The Quarterly Journal of Economics, Oxford University Press, vol. 90(1), pages 38-50.
- Elhanan Helpman, 1987.
"Macroeconomic Effects of Price Controls: The Role of Market Structure,"
NBER Working Papers
2434, National Bureau of Economic Research, Inc.
- Helpman, Elhanan, 1988. "Macroeconomic Effects of Price Controls: The Role of Market Structure," Economic Journal, Royal Economic Society, vol. 98(391), pages 340-54, June.
- R. Glenn Hubbard, 1998.
"Capital-Market Imperfections and Investment,"
Journal of Economic Literature,
American Economic Association, vol. 36(1), pages 193-225, March.
- Benabou, Roland, 1992.
"Inflation and markups : Theories and evidence from the retail trade sector,"
European Economic Review,
Elsevier, vol. 36(2-3), pages 566-574, April.
- Benabou, R., 1991. "Inflation and Markups: Theories and Evidence from the Retail Trade Sector," Working papers 587, Massachusetts Institute of Technology (MIT), Department of Economics.
- Katharine S. Neiss, 2001. "The markup and inflation: evidence in OECD countries," Canadian Journal of Economics, Canadian Economics Association, vol. 34(2), pages 570-587, May.
- anonymous, 2000. "Annual report highlights the Atlanta Fed at work," Financial Update, Federal Reserve Bank of Atlanta, issue Jul, pages 5.
- Steven Salop & Joseph Stiglitz, 1977. "Bargains and ripoffs: a model of monopolistically competitive price dispersion," Special Studies Papers 94, Board of Governors of the Federal Reserve System (U.S.).
- Paul Cavelaars, 2003. "Does Competition Enhancement Have Permanent Inflation Effects?," Kyklos, Wiley Blackwell, vol. 56(1), pages 69-94, February.
- Albert Breton & Ronald Wintrobe, 1978. "A Theory of 'Moral' Suasion," Canadian Journal of Economics, Canadian Economics Association, vol. 11(2), pages 210-19, May.
- World Bank, 2000. "The World Bank Annual Report 2000," World Bank Publications, The World Bank, number 13936, April.
- Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
- Steven Salop & Joseph Stiglitz, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 493-510.
- R. Manning & P. B. Morgan, 1982. "Search and Consumer Theory," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 203-216.
- World Bank, 2000. "The World Bank Annual Report 2000," World Bank Publications, The World Bank, number 13935, April.
- Brennan, Timothy J, 1989. "Regulating by Capping Prices," Journal of Regulatory Economics, Springer, vol. 1(2), pages 133-47, June.
- N. Gregory Mankiw & David Romer (ed.), 1991. "New Keynesian Economics - Vol. 1: Imperfect Competition and Sticky Prices," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262631334.
When requesting a correction, please mention this item's handle: RePEc:lui:rivesi:1711. 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: (Daniela Di Cagno)
If references are entirely missing, you can add them using this form.