Financing of innovation: national development banks in newly industrialized countries of East Asia

Abstract

Contemporary literature on innovation tends to overlook the issue of financing, whereas financial history suggests that banks have been essential to financing of new industries. Emerging literature ondevelopment banking, although inspiring, remains focused on financing policies. The article aims to rearticulate a coevolutionary nature of industrial and financial interests, following the works of Schumpeter and Minsky, by looking at the 4 cases of national development banks, tasked with long-term financing of industries, from newly industrialized countries of East Asia—South Korea, Taiwan, Singapore, and Malaysia. The study suggests that innovation in finance, as well as organizational innovation in financial institutions, represent essential elements of financing of innovative activities. Further, organizational innovation in financial institutions, such as development banks, might signify a disposition to face uncertainty, which characterizes economic and technological unknowns inherent in financing of innovation.