Financial Development and Technology Diffusion

34 Pages Posted: 17 Nov 2014

See all articles by Diego Comin

Diego Comin

Harvard University - Business School (HBS)

Ramana Nanda

Harvard University - Entrepreneurial Management Unit

Date Written: November 2014

Abstract

We examine the extent to which financial market development impacts the diffusion of 16 major technologies, looking across 55 countries, from 1870 to 2000. We find that greater depth in financial markets leads to faster technology diffusion for more capital-intensive technologies, but only in periods closer to the invention of the technology. In fact, we find no differential effect of financial depth on the diffusion of capital-intensive technologies in the late stages of diffusion or in late adopters. Our results are consistent with a view that local financial markets play a critical role in facilitating the process of experimentation that is required for the initial commercialization of technologies. This evidence also points to an important mechanism relating financial market development to technology diffusion and economic growth.

Keywords: banking, experimentation, growth, technology diffusion

Suggested Citation

Comin, Diego and Nanda, Ramana, Financial Development and Technology Diffusion (November 2014). CEPR Discussion Paper No. DP10251. Available at SSRN: https://ssrn.com/abstract=2526364

Diego Comin (Contact Author)

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Ramana Nanda

Harvard University - Entrepreneurial Management Unit ( email )

Boston, MA 02163
United States

HOME PAGE: http://www.people.hbs.edu/rnanda

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