#07-14
Innovation, Information and Financial Architecture
Solomon Tadesse
Abstract: Does a financial system architecture anchored on banks better than one centered on markets in fostering technological innovations as engine 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.
Keywords: G1, G21, G32, E44, O14, O31, O34, O4.
JEL classifications: Technological Progress, Innovation, Intangible Assets, Financial System Architecture, Bank-Based System, Market-Based System
