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Innovation, Information, and Financial Architecture

Published online by Cambridge University Press:  06 April 2009

Solomon Tadesse
Solomon Tadesse
Affiliation:
stadesse@umich.edu, Stephen M. Ross School of Business, University of Michigan, 701 Tappan St., Ann Arbor, MI 48109.
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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.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 41 , Issue 4 , December 2006 , pp. 753 - 786
Copyright
Copyright © School of Business Administration, University of Washington 2006

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