Finance and Innovation System or Chaos

The present paper discusses an important part of the framework conditions for innovation in a number of European countries (France, Italy, Spain, the Netherlands, the United Kingdom) as well Japan and the United States through a comparison of the development of the financial systems in these countries. The main focus is whether a convergence can be observed between what is traditionally perceived as market based and credit based systems respectively. Based on quantitative statistics it is concluded that a convergence has taken place, and it is becoming increasingly more difficult to divide national financial systems into two main categories based on quantitative data alone. But differences still remain, and the paper continues by discussing reasons for convergence and divergence respectively. These reasons include internationalization, differences in industrial structure, as well as changes in national and international regulation. Before turning to a discussion of the policy perspectives of the observed development the paper discusses the financial systems ability to finance different types of transactions.