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Finance, Innovation and Inequality


Prof Mariana Mazzucato
Dr Roberto Simonetti
Dr Cristina Santos


EU DIME network of excellence funding 2008-2009

IKD coordinated a submission on this project to FP7 theme SSH-2007-1.2.3 The role of finance in growth, employment and competitiveness in Europe). Notification in March 2008. Partners from Italy, UK, Czech Republic and France.

Summary and Aims

The key themes explored in the

  • The Interaction between Financial Institutions, Modes of Financing, and Modes of Innovation and Growth
  • Links between Economics of Innovation and Inequality
  • Asset Prices, Bubbles, and Innovation

The Lisbon agenda states that Europe's future prosperity is dependent on developing a knowledge-based economy driven by innovation. To stimulate the supply of innovation it calls for increased public and private investment in R&D to match the proportions of GDP being invested in R&D by Europe's major competitors. However the success of this strategy depends equally on the successful translation of innovation into economic growth. Business experimentation is central to these processes and this ability is central to achieving the objectives of the Lisbon Agenda of 2000 and the new industrial policy in an enlarged European Union. This project will examine key factors that impact on those processes, in particular the interactions between innovation and financial markets. It will lead to a deeper understanding of the complex relationships involved and will inform both policy and practice.

Much of the current debate on financing of innovative companies in Europe is based on models and data derived from experience in the USA, leading to recommendations intended to promote convergence on US structures and practice. We argue that there is now powerful evidence to suggest that the European situation is in fact different, and that Europe therefore needs to develop its own approach, adapted to its own circumstances. This project will provide empirical evidence and theoretical models to underpin the evolution of a distinctive and self-confident European approach to the financing of innovative businesses.

The project will study the ways in which innovative businesses are financed and how this affects not only their own growth and economic performance, but the differential rates of return to owners, managers, workers, investors and financial institutions. It will also study the impact on the evolution of the market as a whole, selection dynamics within the market, the rate of attrition of both new and existing enterprises, and the net contribution from innovative businesses to employment and economic development regionally, nationally and across Europe as a whole. A better understanding of these processes is essential if Europe's slowly increasing rate of investment in R&D is to deliver the economic outcomes envisaged in the Lisbon agenda.


9 November 2007 — Regents Park Conference Centre, London

Finance, Innovation and Inequality: questions and implications for future research

Background publications

Bottazzi, G., E. Cefis, G. Dosi (2002), "Corporate Growth and Industrial Structure. Some Evidence from the Italian Manufacturing Industry", Industrial and Corporate Change 2(4).

Carpenter, M., W. Lazonick, and M. O'Sullivan (2003), "The Stock Market and Innovative Capability in the New Economy: The Optical Networking Industry," Industrial and Corporate Change, 12(5):963-1034.

Delli Gatti D., C. Diguilmi, M. Gallegati, G.Giulioni, (2007), "Financial Fragility, Industrial Dynamics and Business fluctuations in an Agent Based Model", Macroeconomic Dynamics, in press.

Fagiolo, G. and A. Luzzi (2006), "Do Liquidity Constraints Matters in Explaining Size and Growth? Some Evidence from Italian Manufacturing Industry", Industrial and Corporate Change, 15(1):1-39.

Lazonick, W. (2007a), "The Stock Market and the Governance of Innovative Enterprise," Industrial and Corporate Change, forthcoming.

Mazzucato, M. (2003), "Risk, Variety and Volatility: Innovation, Growth and Stock Prices in Old and New Industries," Journal of Evolutionary Economics, 13(5):491-512.

Mazzucato, M. (2002), "The PC Industry: New Economy or Early Life-Cycle," Review of Economic Dynamics, 5:318-345.

Mazzucato, M.,and Semmler, W. (1999), "Stock Market Volatility and Market Share Instability during the US Auto industry Life-Cycle", Journal of Evolutionary Economics, 9(1):67-96.

Metcalfe, J.S., (1994), "Competition, Evolution and the Capital Market", Metroeconomica, 45:127-154.

Russo, A., D. Delli Gatti, M. Gallegati, B. Greenwald, J. Stiglitz (2006), "Business Fluctuations in a credit-network economy" Physica A, 370:68-74.


Prof Mariana Mazzucato,

Contact us

To find out more about our work, or to discuss a potential project, please contact:

International Development Research Office
Faculty of Arts and Social Sciences
The Open University
Walton Hall
Milton Keynes
United Kingdom

T: +44 (0)1908 858502