The Consequences of Financial Innovation: A Counterfactual Research Agenda

93 Pages Posted: 14 Feb 2011 Last revised: 29 Oct 2014

See all articles by Josh Lerner

Josh Lerner

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)

Peter Tufano

University of Oxford - Said Business School; National Bureau of Economic Research (NBER); University of Oxford - Said Business School

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Date Written: February 2011

Abstract

Financial innovation has been both praised as the engine of growth of society and castigated for being the source of the weakness of the economy. In this paper, we review the literature on financial innovation and highlight the similarities and differences between financial innovation and other forms of innovation. We also propose a research agenda to systematically address the social welfare implications of financial innovation. To complement existing empirical and theoretical methods, we propose that scholars examine case studies of systemic (widely adopted) innovations, explicitly considering counterfactual histories had the innovations never been invented or adopted.

Suggested Citation

Lerner, Josh and Tufano, Peter, The Consequences of Financial Innovation: A Counterfactual Research Agenda (February 2011). NBER Working Paper No. w16780. Available at SSRN: https://ssrn.com/abstract=1759852

Josh Lerner (Contact Author)

Harvard Business School - Finance Unit ( email )

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Harvard University - Entrepreneurial Management Unit

Cambridge, MA 02163
United States

National Bureau of Economic Research (NBER)

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Peter Tufano

University of Oxford - Said Business School ( email )

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Oxford, OX1 1HP
Great Britain
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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain
+44 (0) 1865 288551 (Phone)

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