Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Working Knowledge
Business Research for Business Leaders
  • Browse All Articles
  • Popular Articles
  • Cold Call Podcast
  • Managing the Future of Work Podcast
  • About Us
  • Book
  • Leadership
  • Marketing
  • Finance
  • Management
  • Entrepreneurship
  • All Topics...
  • Topics
    • COVID-19
    • Entrepreneurship
    • Finance
    • Gender
    • Globalization
    • Leadership
    • Management
    • Negotiation
    • Social Enterprise
    • Strategy
  • Sections
    • Book
    • Podcasts
    • HBS Case
    • In Practice
    • Lessons from the Classroom
    • Op-Ed
    • Research & Ideas
    • Research Event
    • Sharpening Your Skills
    • What Do You Think?
    • Working Paper Summaries
  • Browse All
    Financial Development and Technology Diffusion
    18 Nov 2014Working Paper Summaries

    Financial Development and Technology Diffusion

    by Diego Comin and Ramana Nanda
    Most scholarship looking at the role of financial market development in productivity and economic growth has tended to focus on the role of better developed financial markets in allocating capital efficiently across investment opportunities. In this paper, the authors provide evidence for another key role played by well-developed financial markets: reducing the frictions associated with the adoption and the diffusion of new technologies. Using a large dataset that covers the diffusion of 16 major technologies across 55 countries and 130 years, the authors examine whether greater depth in the banking sector leads to faster diffusion of these new technologies. Results provide compelling evidence that banking sector depth facilitates the faster diffusion of more capital intensive technologies. This effect operates in the early stages of diffusion and in the early adopters of technology. Overall, the evidence points to the importance of capital markets for the experimentation required to overcome the initial hurdles of adoption and diffusion. Key concepts include:
    • Well-developed financial markets reduce the frictions associated with the adoption and diffusion of new technologies.
    • Domestic capital markets play a key role in the diffusion of technologies in a country, particularly in the early stages of the technology's lifecycle.
    LinkedIn
    Email

    Author 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.

    Paper Information

    • Full Working Paper Text
    • Working Paper Publication Date: November 2014
    • HBS Working Paper Number: 15-036
    • Faculty Unit(s): Entrepreneurial Management
      Trending
        • 14 Mar 2023
        • In Practice

        What Does the Failure of Silicon Valley Bank Say About the State of Finance?

        • 16 Mar 2023
        • Research & Ideas

        Why Business Travel Still Matters in a Zoom World

        • 25 Jan 2022
        • Research & Ideas

        More Proof That Money Can Buy Happiness (or a Life with Less Stress)

        • 25 Feb 2019
        • Research & Ideas

        How Gender Stereotypes Kill a Woman’s Self-Confidence

        • 13 Mar 2023
        • Op-Ed

        How Leaders Should Leave

    Ramana Nanda
    Ramana Nanda
    Visiting Scholar
    Contact
    Send an email
    → More Articles

    Sign up for our weekly newsletter

    Interested in improving your business? Learn about fresh research and ideas from Harvard Business School faculty.
    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.
    ǁ
    Campus Map
    Harvard Business School Working Knowledge
    Baker Library | Bloomberg Center
    Soldiers Field
    Boston, MA 02163
    Email: Editor-in-Chief
    →Map & Directions
    →More Contact Information
    • Make a Gift
    • Site Map
    • Jobs
    • Harvard University
    • Trademarks
    • Policies
    • Accessibility
    • Digital Accessibility
    Copyright © President & Fellows of Harvard College