Understanding financial innovation systems: Veblen and Minsky at the periphery

Solange Gomes Leonel, Sylvia Ferreira Marques, Ester Carneiro do Couto Santos and Marco Flávio Resende
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Solange Gomes Leonel: Cedeplar Centro de Desenvolvimento e Planejamento Regional Face, UFMG
Sylvia Ferreira Marques: Federal University of Minas Gerais
Ester Carneiro do Couto Santos: Federal University of Minas Gerais

European Journal of Economics and Economic Policies: Intervention, 2013, vol. 10, issue 1, 93-105

Abstract: Setting off from an Evolutionary perspective, this paper debates key aspects of the process of financing innovation based on Keynes's asset choice model within the context of Minsky's cycle and the Institutionalist approach of Veblen. Innovative activity is surrounded by great uncertainty because firms invest funds for the long term without being sure whether they will earn high returns. As a result, firms run into additional obstacles when trying to obtain financing to develop new technologies. This difference becomes clearer when developed countries (USA) and less-developed countries (Brazil) are compared. The higher the level of uncertainty in world markets, the lower the amount of funds available to finance innovation; and this situation is accentuated in less-developed countries because they do not have a mature financial system capable of supporting innovation risks.

Keywords: Â financing innovation; uncertainty; asset choice; Veblen; Minsky (search for similar items in EconPapers)
JEL-codes: E12 O16 O43 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:elg:ejeepi:v:10:y:2013:i:1:p93-105

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