Competition and Innovation in the Financial Sector: Evidence from the Rise of FinTech Start-ups

Doina Caragea, Theodor Cojoianu, Mihai Dobri, Andreas Hoepner and Oana Peia

No 202201, Working Papers from School of Economics, University College Dublin

Abstract: We provide new evidence on the effects of competition on incumbents' innovative behavior by examining the rise of FinTech start-ups over the period 2000-2016. We employ machine learning techniques to classify a large global sample of patent applications into five FinTech categories. We exploit the variation in the share of FinTech patent applications by non-financial startups to incumbent financial firms to measure competitive pressures from outside the financial industry. We show that higher competitive pressures from non-financial start-ups increases the probability that financial incumbents innovate. Moreover, competition from start-ups results in a higher number of FinTech patent applications by financial incumbents as compared to non-financial firms, especially when the innovations of FinTech start-ups are more important, as proxied by future patent citations count.

Keywords: FinTech; Patents; Machine learning; Financial incumbents; Innovation (search for similar items in EconPapers)
JEL-codes: G20 G21 O31 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2022-01
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10197/12774 First version, 2022 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 405 Not Allowed (http://hdl.handle.net/10197/12774 [302 Found]--> https://researchrepository.ucd.ie/handle/10197/12774)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucn:wpaper:202201

Access Statistics for this paper

More papers in Working Papers from School of Economics, University College Dublin Contact information at EDIRC.
Bibliographic data for series maintained by UCD School of Economics ().