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The New New Financial Thing: The Sources of Innovation Before and After State Street


  • Josh Lerner


This paper examines the sources of financial innovations between 1990 and 2002, using Wall Street Journal articles as indicators of innovations. No evidence suggests that larger firms are particularly innovative; in many specifications, there is a disproportionate representation of smaller firms among the innovators. Less profitable firms and those with stronger academic ties also innovate more. The elasticity of innovation with respect to size appears to have increased sharply since the State Street decision that greatly accelerated the rate of financial patenting. I conclude by exploring how the origins of financial patents resemble or differ from those of innovations.

Suggested Citation

  • Josh Lerner, 2004. "The New New Financial Thing: The Sources of Innovation Before and After State Street," NBER Working Papers 10223, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:10223
    Note: CF PR

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    References listed on IDEAS

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    Cited by:

    1. Bronwyn H. Hall & Grid Thoma & Salvatore Torrisi, 2009. "Financial Patenting in Europe," NBER Working Papers 14714, National Bureau of Economic Research, Inc.
    2. Peter Wood & Dariusz Wójcik, 2010. "A Dominant Node of Service Innovation: London’s Financial, Professional and Consultancy Services," Chapters,in: The Handbook of Innovation and Services, chapter 25 Edward Elgar Publishing.
    3. Bronwyn H. Hall & Lee E. Manfred, 2007. "Innovation in non-bank payment systems," Proceedings – Payments System Research Conferences, Federal Reserve Bank of Kansas City.

    More about this item

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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