Trade and credit markets:the two necessary ingredients for innovation
Terra and Vasconcelos use a general equilibrium model to show that trade openess has a positive impact on innovation only in the country with a better functioning financial system. On the contrary, in countries with less developed credit markets trade openess has a negative effect on innovation. Their findings provide a possible explanation to why when controlling for institutions the relation between trade and growth may even turn out to be
negative in certain cases.
Credit Market Quality,Innovation and Trade
Authors: Cristina Terra, Enrico Vasconcelos
From: ESSEC Business School – Banco Central do Brasil
Raising capital from the stock market has an ambiguous effect on innovation
Raising capital from the stock market via an initial public offering is an efficient way for firms to finance their innovation activities. Yet, once public, companies and their managements become preoccupied with maximizing shareholder value and start shunning innovative projects that are considered risky. He and al. try to answer this dilemma by using Chinese firm-level data. They find that the more financially constrained was a firm before its IPO the larger the positive impact of the IPO on innovation.
Does the Stock Market Boost Firm Innovation? : Evidence from Chinese Firms
Authors: Hui He, Hanya Li, Jinfan Zhang
From: IMF
…this is not the case in the US argues Lazonick. His analysis of the role of stock market in the US corporate economy during the past century shows maximizing shareholder value has become incompatible with innovation.
How “Shareholder Value” is Killing Innovation
By: William Lazonick – INET
Do young managers foster innovation as they promote a different corporate culture?
Can the age of the management team mitigate the above mentioned principal agent problem between shareholders and corporations? Acemoglu and al. develop a model which predicts a relationship between manager age and radical innovation. In particular, they find that manager age is “both a determinant of radical innovations and a proxy for a corporate culture that is more open to disruption and/or more conducive to radical innovations.”
Young, Restless and Creative: Openness to Disruption and Creative Innovations
Authors: Daron Acemoglu, Ufuk Akcigit, Murat Alp Celik
From: MIT – University of Chicago – University of Toronto
