The New New Financial Thing: The Sources of Innovation Before and after State Street

56 Pages Posted: 20 Jan 2004 Last revised: 9 Dec 2022

See all articles by Josh Lerner

Josh Lerner

Harvard Business School - Finance Unit; Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI); Harvard University - Private Capital Research Institute

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Date Written: January 2004

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.

Suggested Citation

Lerner, Josh, The New New Financial Thing: The Sources of Innovation Before and after State Street (January 2004). NBER Working Paper No. w10223, Available at SSRN: https://ssrn.com/abstract=486227

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