Working Paper: NBER ID: w10223
Authors: Josh Lerner
Abstract: This paper examines the sources of financial innovations between 1990 and 2002, using Wall Street Journal articles as indicators of innovations. No evidence suggests that larger firms are particularly innovative; in many specifications, there is a disproportionate representation of smaller firms among the innovators. Less profitable firms and those with stronger academic ties also innovate more. The elasticity of innovation with respect to size appears to have increased sharply since the State Street decision that greatly accelerated the rate of financial patenting. I conclude by exploring how the origins of financial patents resemble or differ from those of innovations.
Keywords: financial innovation; patenting; State Street decision; Wall Street Journal; academic ties
JEL Codes: G2; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| State Street decision (L49) | innovation landscape (O36) |
| firm size (L25) | innovation rate (O35) |
| profitability (L21) | innovation rate (O35) |
| academic ties (Y80) | innovation rate (O35) |
| firm size (L25) | elasticity of innovation (O39) |