Finance and the Diffusion of Digital Technologies

The paper examines how different dimensions of financial development have influenced firms’ willingness to adopt new digital technologies (IT). To do so, it introduces an econometric analysis based on an Error Correction Model run over a panel of fifteen industrialized countries. The results point to the importance of stock market development and suggest that market-based systems encourage digital investments better than bank-based ones. The evidence is consistent with theories that stress the effective selection of projects carried out by stock markets and the positive role that new financial tools traded within these markets had on IT adoption.