Financial Institutions for Innovation and Development (FIID)

The FIID project studies the types of financial institutions – in terms of their governance, organization, and operation – that support innovation at the level of the business enterprise, and the implications for stable and equitable growth at the level of the economy as a whole. We define innovation as the processes that generate higher quality, lower cost products at prevailing factor prices. Innovation creates the possibility for growth in per capita incomes, but that growth may be unstable over time and inequitably distributed across the population. A prime challenge for legislators and policy-makers concerned with economic development is to structure financial institutions so that they support innovation in ways that contribute to stable and equitable growth.

Included in the project thus far are three nations, the United States, Japan, and China, with a focus on innovation in information and communication technologies (ICT), biotechnology (especially biopharmaceuticals), and clean technology (in particular wind and solar power). The project is analyzing the governance, organization and operation of financial institutions that are central to funding industrial innovation in key high-tech sectors of the economy. Our analytical framework accords a potentially central role to business interests in the restructuring of financial institutions.

Since January 2010, the Ford Foundation has funded the FIID project as part of its Initiative on Reforming Global Finance (Program Officer: Leonardo Burlamaqui). Since January 2011 the Institute for New Economic Thinking (INET) has provided complementary funding for a project, “The Stock Market and Innovative Enterprise”, also directed by William Lazonick.