Edited by Anthony Bartzokas and Sunil Mani
Chapter 3: The financing and governance of new technologies
3. The ﬁnancing and governance of new technologies Colin Mayer* 1. INTRODUCTION What are the ﬁnancial sector preconditions for the successful development of a high-technology sector? The conventional answer is straightforward: an active venture capital industry combined with a liquid domestic stock market. The development of venture capital ﬁrms and stock markets is regarded as a priority for the growth of high-tech industries. Is this correct? How do high-tech ﬁrms ﬁnance themselves and what role do stock markets play in their development? There is accumulating evidence of a relationship between ﬁnancial development and economic growth. Several studies report a relation between the size of ﬁnancial systems at the start of a period and subsequent economic growth. Controlling for other considerations, ﬁnancial development appears to contribute to growth. A range of measures of ﬁnancial development are relevant – the volume of monetary assets, the size of banking systems and the size of stock markets. To the extent that it is possible to establish the channel by which ﬁnancial development contributes to growth, it appears to be through the external ﬁnancing of ﬁrms. Comparing the growth of diﬀerent industries across countries or diﬀerent companies suggests that there is an interrelationship between their growth rates, the extent to which they are dependent on external ﬁnance and the development of ﬁnancial systems in which they are operating. In other words, ﬁnancial development confers particular advantages on industries and companies that are especially dependent on external ﬁnance. These results are consistent with the view...
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