- List of Figures
- List of Tables
- List of Contributors
- Perspectives on Innovation Management
- The Nature of Innovation
- Marketing and Innovation
- Science, Technology, and Business Innovation
- User-driven Innovation
- Networks of Innovation
- Knowledge and the Management of Creativity and Innovation
- Design-Driven Innovation: Meaning as a Source of Innovation
- Brokerage and Innovation
- Sectoral Systems of Innovation
- Innovation Ecosystems: Implications for Innovation Management?
- Markets for Technology
- Capital Markets, Innovation Systems, and the Financing of Innovation
- Consumption of Innovation
- Sustainable Innovation Management
- Managing Social Innovation
- Innovation Management in Japan
- Innovation Management in China
- Technology and Innovation
- Innovation, Strategy, and Hypercompetition
- Business Model Innovation
- Managing Open Innovation
- Collaboration and Innovation Management
- Organizing Innovation
- Human Resource Management Practices and Innovation
- Managing R&D and New Product Development
- Internationalization of Research and Development
- Intellectual Property Rights, Standards, and the Management of Innovation
- Mergers and Acquisitions and Innovation
- Services, Innovation, and Managing Service Innovation
- Innovation and Project Management
- Platforms and Innovation
Abstract and Keywords
This chapter reviews conceptual and empirical arguments for expecting the structure and nature of capital markets to impact on the financing of innovation. Market failure and innovation systems approaches to problems in the financing of innovation are reviewed, including approaches based on the varieties of capitalism, insider and outsider financial systems, and legal rights literatures. The complementarity between financial markets and other markets coordinating the allocation of resources is emphasized so that the impact of financing problems on innovation behaviour cannot readily be separated from wider system effects. The chapter concludes that there are generic issues involved in the financing of innovation related centrally to the long-term and uncertain nature of the pay-offs to innovation investment. The evidence suggests that different financial systems embedded in different financial market and legal structures address different elements of this problem in different ways. Relatively coordinated and bank-financed insider systems appear to offer greater commitments of long-term patient capital alongside investment in firm-specific human capital. There are big pay-offs in these systems in terms of incremental innovation in particular. The death of bank-based coordinated systems has been, as Mark Twain remarked on reading his obituary, greatly exaggerated.
Keywords: Capital Markets, Innovation, Finance, capital markets, financing of innovation, capitalism, financial systems, allocation of resources, insider systems, human capital, incremental innovation, coordinated systems, banks
Alan Hughes, Margaret Thatcher Professor of Enterprise Studies and Director, Centre for Business Research, University of Cambridge and Director, UK Innovation Research Centre.
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