The new new financial thing: The origins of financial innovations

The origins of financial innovations have attracted little empirical scrutiny. Using Wall Street Journal articles as an indicator, this paper examines which institutions were the key financial innovators between 1990 and 2002. The evidence suggests that smaller firms account for a disproportionate share of the innovations. Less profitable firms innovate more, though in the years subsequent to the introduction of the innovation, the profitability of the innovators increases significantly. Finally, older, less leveraged firms located in regions with more financial innovations innovate more. While several of the determinants of patenting are similar, small and unprofitable firms do not patent disproportionately.