Banks as Catalysts for Industrialization

Da Rin, Marco and Hellmann, Thomas (2002) Banks as Catalysts for Industrialization. Journal of Financial Intermediation, 11 (4). pp. 366-397.

Abstract

We provide a new theory of the role of banks as catalysts for industrialization. In their influential analysis of continental European industrialization, Gerschenkron and Schumpeter argued that banks promoted the creation of new industries. We formalize this role of banks by introducing financial intermediaries into a “big push” model. We show that banks may act as catalysts for industrialization provided they are sufficiently large to mobilize a critical mass of firms and that they possess sufficient market power to make profits from coordination. The theory provides simple conditions that help explain why banks seem to play a creative role in some but not in other emerging markets. The model also shows that universal banking helps to reduce the cost of acting as catalyst.

Item Type: Article
Keywords: banking; industrialization; finance
Subject(s): Finance
Date Deposited: 14 May 2015 10:44
Last Modified: 24 Feb 2017 15:07
Funders: N/A
URI: http://eureka.sbs.ox.ac.uk/id/eprint/5323

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