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OCR for page 453
The Role of Large Barks
in Financing Innovation
JOHN S. REED and GLEN R. MORENO
The role of majorfinar~czal institutions in stimulating technological
innovation is not limited to the simple lending offends. In the broad-
est sense, it lies in creating newfnancial techniques, or in innovation
of financial technology. It is as innovators themselves that large
financial institutions play their most decisive role irz suz'DortinQ irz-
novation among their client companies.
or
There is growing, recognition that technological innovation is a key de-
tenninant of continuing economic growth and prosperity. International at-
tention has focused on the United States, where the emergence of a service
economy, the rapid growth of high technology companies, and the apparent
linkage between the grown of small companies and job creation offer promise
of maintaining grown in the postindustrial economy. The increasing im-
portance of high technology industries in Japan, where economic growth,
though slower, continues, seems to offer fumier hope of a reasonably ordered
transition from an economic system based on heavy industry to one centered
on the emerging technologies of our times.
These trends have been closely observed in Europe. There, policy initia-
. . .
rives to maintain economic growth and employment over the past decade are
generally recognized to have failed. Policies based on maintaining employ-
ment through increasing public sector intervention—rigid labor practices,
industry protection, and subsidies have arguably hastened, rather than de-
layed, the competitive demise of the industries concerned. Thus, throughout
the developed economies, there is an emerging consensus that innovation
brings growth, and policymakers are increasingly seeking ways to stimulate
technological innovation and new company formation.
453
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JOHN S. REED and GLEN R. MORENO
As a subset of these broad economic policy considerations, there is a
==owing perception of the importance of national and international financial
systems to the process of technological innovation and economic growth.
This is most evident in the keen international interest in the venture capital
phenomenon in the United States, and in the various public and private sector
initiatives to emulate its successes abroad. The venture capital system, how-
ever, represents only a tiny portion of the capital-formation process. It is,
therefore, important to enhance the overall effectiveness of the financial
system in supporting technological innovation.
Our purpose in this chapter is to describe briefly the role of large banks
in financing technological innovation in industry. Since there is little pub-
lished material on the subject, we have of necessity relied on the collective
experience of our own organization (Citibank Corporations and our inter-
pretation of general trends in the global financial system. The theme that
emerges quite consistently from our observations is Cat the role of major
financial institutions in stimulating technological innovation is not limited to
the simple lending of fiends. In the broadest sense, it lies in creating, new
financial techniques, or in innovation of financial technology. It is as in-
novators themselves that large financial institutions play their most decisive
role in supporting innovation among Heir client companies. Financial in-
novation supports technological innovation. Thus, the public interest is best
served by a financial system that provides maximum scope for competition
and innovation in financial services.
BANKS ANI:) TECHNOLOGICAL INNOVATION
It is wow noting that banks' involvement in He innovative process is not
limited to their role as financial intermediaries. Technology has significantly
influenced the historical development of the banking system and is a major
factor for change in the financial services industry today.
The historical evolution of America's large financial institutions is closely
interned with the process of technological innovation in the nineteenth
century. In transportation technology, He opening of the Erie Canal in 1825
and advent of the railroad in He 1830s strengthened New York's position
as the coun~y's manufacturing and trading center. This, in mm, led to New
York's emergence as the dominant financial center in the country. Country
banks kept balances with New York banks as liquid reserves for clearing the
variety of commercial transactions Hat passed Trough the city, and the New
York banks soon held a major part of the total banking resources in the
country. Thus, technological innovation was instrumental in creating He
forerunners of the '`money center" banks 150 years ago.
Citibank offers an interesting example of the historical linkage between
technology and banking, for its fortunes during the nineteenth century were
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THE RO' F OF LARGE BANKS IN FINANCING INNOVATION
455
closely linked to technological innovation. The basis of the bank's wealth
and influence and that of its dominant shareholders progressed from trading
coal to dominating Me New York lighting utilities, whose technology was
based on gas manufactured from coal. This activity led to heavy investment
in the railroads that brought the coal to New York City and investment in
iron manufacturing, another heavy user of coal. The bank was involved in
the progress of the metallurgy industry in the United States and financed the
introduction of the Bessemer steel process at the Lackawanna Iron Company.
Citibank was also active in the development of communications technology;
it financed Me laying of the fist transatlantic cable from 1858 to 1866 and
at one point dominated the Western Union Telegraph Company, then the
largest enterprise in the world.
Today, the tables have been fumed and it is the financial services industry
Mat finds itself dominated by the new information technologies. A recent
study for Congress by Me Office of Technology Assessment described the
scope of this influence: "The applications of advanced inforTnat~on and tele-
communicahons technologies in systems for delivering financial services
change the way those services are created, delivered, pnced, received, ac-
cepted and used. " ~
It is therefore not surprising that possibly Me most direct way in which
financial institutions fund innovation is as purchasers and users of infonnation
technology. U.S. depository institutions spent well over $8 billion in 1984
on data processing equipment and services, excluding office automation.
Commercial banks alone spent just under $5 billion on purchases of data
processing equipment and services from outside vendors. Almost half of
those purchases were made by the coun~y's 240 largest banks. Citicorp itself
is, of course, a major user of technology-related services and equipment.
Our estimated expenditures in these areas are approaching half a billion
dollars a year.
As users, large financial institutions are actively exploring and developing
commercial applications for new technologies as they are introduced. Rapid
advances in voice, facsimile, image, and graphics processing, as well as
communications technologies, give rise to new commercial opportunities for
accessing, manipulating, and using infonnation in financial businesses. Au-
tomated teller machines, point-of-sale terminals, and home-banking networks
are spreading across the United States. Many banks, including Citicorp, are
building worldwide computing networks linking common databases around
Me globe. Electronic trading systems and international fund-transfer networks
are part of this growing international financial network. Some large financial
institutions, again including Citicorp, have invested in or operate they own
technology affiliates, working win other companies to develop specific hard-
ware and software for application within their financial services businesses.
These aggregate activities represent a significant source of concentrated
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JOHN S. REED and GLEN R. MORENO
orders and revenue to the technology companies whose products and services
are involved. hn addition, they provide a screening process in the selection
of commercially viable technological innovations. At least In the field of
information technology, innovation in financial services quite demonstrably
supports technological innovation.
THE ROLE OF LARGE BANKS IN THE F~ANCLAL SYSTEM
The direct role of banks as users of technological innovation is relatively
simple to describe and quantify. When viewing the broader role of banks as
financial intermediaries, however, it is much more difficult to establish direct
links between bank finance and technological innovation. Part of this diff~-
culty lies in the nature of bank lending itself, which is designed to avoid or
mitigate risks predicated on the success of a particular innovation. Bank
lending by its very nature tends to finance innovation indirectly. Thus, to
better understand He role of banks in financing innovation, it is useful to
understand He role that banks and other financial institutions play in financing
the total economy.
Domestic financial institutions held total assets of over $6 tnilion in 1983.
Banks and savings and loan institutions accounted for almost half of those
assets, and life insurance companies and pension funds made up another
quarter. Large banks held a concentrated share of those assets. Out of the
nation's 14,500 banks, the roughly 240 banks with balance sheets of more
than $1 billion held about 60 percent of total domestic banking assets. Clearly
large banks play a very significant role in the U.S. financial system.
This does not mean Hat large banks or the banking system as a whole are
dominant providers of funds to American industry. In fact, bank debt is used
to fund less than 10 percent of the total assets of American manufacturing
companies. This reflects the importance of public bond issues, equity, internal
cash generation, and trade credit in financing American enterprise.
The U.S. system is quite different from some other major financial systems
in this respect. In Japan banks play a much more dominant role in the supply
of finance to industry. Japanese companies are much more leveraged than
their U.S. counterparts, and He vast majority of Japanese borrowings is
represented by bank debt, which accounts for as much as 75 to 80 percent
of total external borrowings of Japanese companies. This high level of bank
borrowing, combined win the system of "main bank" relationships, leads
to a much more dominant role of Japanese banks in the affairs of Japanese
companies.
The situation in West Germany is not as pronounced as that in Japan, but
German banks do play a more important role in financing enterprise Han is
the case in the United States. This is due to He relatively high leverage of
German companies, die German universal banking system (in which banks
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457
provide most sources of funding), and the house bank system (wherein one
bank normally enjoys board representation and traditionally plays a leading
role in the arranging of a company's financed.
The British banking system provides the closest parallel to the limited role
of banks in the United States. Since the Industrial Revolution, British com-
panies have sought to maintain a measure of independence from the banking
system by covering the bulk of their finance from internal sources. Over the
last several years retained earnings accounted for 68 percent of the sources
of funds of British companies, compared to only 17 percent for individual
bank borrowings and less than 5 percent for United Kingdom capital market
issues.
In sum, large banks are a very important factorin the U.S. financial system.
But even allowing for public debt underwritten by investment banks, bor-
rowings through U.S. financial institutions play a somewhat limited role in
financing American business, both as a percentage of total funding sources
and in comparison with other major financial systems. Moreover, our ex-
perience indicates that the role of large banks in financing technological
innovation appears to increase in importance with company size. This may
be demonstrated by examining the role of large banks in financing innovation
in companies at three phases of maturity: the start-up company; the emerging
growth company; and Me large, established company.
LARGE BANKS AND TlIE START-UP COMPANY
Banks rarely finance start-up operations directly. This prudence is essential
to the effective functioning of the banking system.
True start-up ventures are risky. They involve plans, hopes, and uncer-
tainty. If successful, the rewards are significant. Failure can mean losing all,
and failure rates are statistically high. It is thus clear Mat the appropriate
funding for start-up ventures is equity capital. Equity investors tie their
fortunes to the risk of failure of the enterprise they back. They take high
risk for high reward and understand that the failure of the enterprise means
the probable loss of their equity.
This is clearly an inappropriate role for bank lending. One of the primary
functions of the banking system is to provide a safe home for depositors'
savings. This means that the quality of its assets must be excellent. Banks
are leveraged 20 to 1, spreads to cover loan losses are small, and, to quote
one Citibanker: "Banks need to bat around .990 to survive." It is therefore
standard credit doctrine in American commercial banks that loans to start-
ups cannot be solely dependent on the success of a single innovation or
product. Good commercial lending practice dictates two or even three sources
of repayment in any lending situation. Adherence to this doctrine is an
essential ingredient of the health and solidity of the banking system.
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JOHN S. REED and GLEN R. MORENO
Banks may play an indirect role in the early stages of business start-ups,
however. Peter Drucker has posed the question: "But who nurtures the true
start up enterprise? And how? We really do not know, yet the money clearly
is there. . . ,,2 It seems probable that at least part of the answer lies in the
retail financial services industry. Personal savings through a growing variety
of investment instruments, as well as home equity loans and other forms of
secured personal borrowing, may be a large source of funding to Amenca's
infant businesses.
There is certainly no similar obscurity about the significant role of venture
capital finance in developing the new enterprise. While small in absolute
terms, venture capital finance clearly has played a very important role in the
development of new companies, and particularly in those involved in in-
novative technology.
Large banks and other financial institutions play an important role in
venture finance. The venture capital affiliates of banks appear to have pro-
vided roughly $1.5 billion, or more than 10 percent of total resources, to
the venture capital business by the end of 1983. In that year banks provided
$130 million of the $1.8 billion incremental investment. Large banks are
dominant in this process; fewer than 100 banks are active, and a handful
provide between one-third and one-half of total bank venture capital funding.
Citicorp's venture capital portfolio at the end of 1984 had 122 investments,
with a market value of over $300 million. Our investments span a broad
range of industries, including information technology, health care, energy,
and transportation. We also maintain a $200 million leveraged budget fund
to enable managers to purchase and run their companies. This is often an
important further source of innovation in the companies concerned.
Banks and insurance companies tend to specialize in the later stages of
venture capital financings. Increasingly, these institutions provide important
liquidity in the expansion of venture companies. This makes the venture
capital business less dependent on the fluctuating outlook for public sector
securities offerings and provides additional staying power in troubled times.
Large banks have played an important role in the development of the
innovative financing techniques of venture capital. They have provided many
talented people for the venture capital industry and have been instrumental
in establishing the industry outside the United Sates and in transfemng
professional skills and knowledge. Citicorp, for example, has been an im-
por~t factor in the relatively young venture capital market in the United
Kingdom since 1980 and has over £20 million invested in almost 30 com-
panies. We have also recently established new venture capital businesses in
West Germany, France, and Italy. We are generally viewed as an important
source of financial innovation in those markets. ~
Venture capital affiliates offer an interesting example of how a bank's
holding companies can respond to the different needs and opportunities of
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THE RO' F: OF LARGE BANKS IN FINANCING INNOVATION
459
new ventures without compromising the lending practices of their commercial
banking arms. They function with specially trained staff usin, quite different
investment criteria. Thus, banks can play an active role in one of the most
innovative sectors of finance while maintaining the prudential standards re-
. . . . . .
qulred or c ,eposltory Institutions.
BANKS AND THE EMERGING GROWTH COMPANY
One of our colleagues describes the very different roles of bank lending
and seed capital in this way: '`The venture capitalist finances ideas the
banker finances sales." Once a company has begun to translate its products
and services into sales revenue, banks can begin the process of evaluating
the ongoing commercial viability of the enteIpnse. That analysis is not limited
to the new product itself, but to the overall capabilities of the company:
management, marketing, and finance.
In this sense, financial intermediaries play an important role in screening
the commercial usefulness of technological innovation. The banker who
extends credit, or the investment barker who takes a new company to the
public markets, is perfo~ing a financial "gatekeeper" role analogous to
that ascribed by Nathan Rosenberg to the technical gatekeeper in user in-
dustnes. In a broader context, the aggregate of these screening decisions
probably represents a valuable economic benefit. The financial gateway func-
tion helps to ensure that scarce resources are allocated to those innovative
opportunities most likely to bring maximum economic return.
Initial banking contacts for the emerging company tend to be established
win local or regional banks, due to He strong local networks and knowledge
of the local marketplace that these banks enjoy, and because local banks can
provide checking accounts, payroll services, and other depository and ~ans-
actional services to new companies. These noncredit services are an important
link to subsequent bank credit, since bankers have much better insight into
the financial affairs of a young company when they are involved in its trade
payments and have a reasonable overview of its flow of funds.
It is worth noting Hat regulatory constraints on interstate banking prohibit
all institutions from providing local depository and payment services. This,
in turn, limits or delays their ability to begin providing credit at an early
stage in the development of new companies. It is thus probable that regulation
has limited the flow of funds from large financial institutions to smaller
companies. Logic dictates that this restriction limits competitive choice and
increases the cost of financing in these Finns.
Large banks begin to play a significant role in the emerging company's
affairs when its financing needs become large in comparison with the normal
lending capabilities of local banks. This relationship generally begins with
the desire of the company to establish contact with a major institution that
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JOHN S. REED and GLEN R. MOP`ENO
will have the capacity to meet significant financing requirements in future
years.
As a company grows, large banks tend to satisfy its increasingly complex
financial needs. The introduction of financial management systems to control
and optimize cash flows offers one example. Large banks also offer a growing
array of risk-management techniques: financial futures, floor- and ceiling-
rate products, currency options, and many other instruments designed to
cushion the company against volatile financial markets. Most of these f~-
nancial innovations have been developed in major commercial and investment
banks. They play an important role in transferring this financial technology
to the emerging company.
Most technology companies are involved in international markets at a
relatively early stage. This occurs through export sales and component or
assembly relationships abroad. Meeting the international financial needs of
these companies is very much the province of large banks, which represent
a very high percentage of U.S. overseas bank branches.
The banks' knowledge of overseas markets and how to do business Here
is very important to younger companies. They also provide local-currency
financing for new entrants into overseas markets where capital markets are
not as deep as in the United States, and it is the bank's introduction and
assessment of the company that may well establish its credit standing in those
markets.
All of this highlights the important role that large banks play in assisting
the emerging company to develop financial skills and capabilities to help it
manage its growth in the United States and world markets. Through the
development of increasingly complex financial problems in a competitive
world, banks provide support to the growing company well beyond the simple
prOVlSlOn OI nIlanCe.
FINANCING INNOVATION IN THE ESTABLISHED COMPANY
The most important role of large financial institutions probably lies in
financing technological innovation in the large and established companies
that represent such a significant portion of the total U.S. and global economy.
Within the "safe confines" of these established enterprises, the evidence is
that technological innovation imposes an increasingly heavy burden. Nathan
Rosenberg has noted that: "A central feature of high-technology industries
that is likely to become increasingly significant is an apparently inexorable
rise in the development costs of new products."3
There is a popular tendency to equate invention and innovation with small
companies. Indeed, the list of significant technological innovations generated
by small enterprises is impressive. But it would be wrong to ignore the
tremendous importance of research, development, and innovation activity
Hat occurs in the world's large corporations. To our knowledge there is no
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THE RO' F OF LARGE BANKS IN FINANCING INNOVATION
461
significant relationship between innovation and the size of a firm. R&D
expenditures and patent activity tend to show roughly the same proportion
to sales in both small and large companies. While these are not the only
proxies for technical innovation, the implication is clear that innovation is
not predominantly a small-company phenomenon. Finally, of course, small
companies that consistently introduce successful innovative products tend to
become large companies very quickly, and some, like IBM, become giants
in the global economy within a generation or so.
Financing development costs Rough increasingly innovative financial
techniques is probably the key challenge faced by large financial institutions
in supporting technological innovation. Indeed, it is arguable that innovative
financial techniques have been instrumental in clearing He way for com-
mercial development of some key technological applications.
Following are some important examples, starting with Be commercial
aircraft industry regarding which Rosenberg has highlighted "the extreme
impact of rising development costs in the commercial aircraft industry es-
pecially since the advent of Be jet engine in Be l950s...."3
Banks played an important role in Be introduction of jet aircraft to the
commercial airline industry beginning with the Boeing 707 and Be Douglas
DC-~. In the late 1950s and early 1960s, the commercial airlines faced the
need to finance aircraft costing up to $5 million as opposed to Be $1 million
or less typically paid for nonjet aircraft up to that tune. The money center
banks developed new forms of revolving credit and brought in long-term
money from Be insurance industry to finance these purchases, thus helping
to create an adequate market for the production of the 707 and the DC-~.
Later, when the 727 was being considered for production, there was con-
cern Mat one major carner's inability to finance new aircraft would jeopardize
the entire program. Citibank, Chase Manhattan, Boeing, and Eastern Airlines
executives worked out a financing program that made development of this
commercially successful aircraft possible.
Aircraft leasing was a financial innovation directly attributable to a small
group of bankers and lawyers who introduced the investor tax lease. This
financial innovation became a critical factor in financing future commercial
al aft sales on a large scale. Another was the development of export finance
program in conjunction with the Export-hmport Bank.
The Boeing 747, the first commercial wide-bodied jet, was originally
financed by a $1 billion syndicated credit led by Citibank a huge amount
for a single credit in the late 1960s. Nor was that loan without its moments
of drama; difficulties with the jet engines for the "jumbo" delayed sales and
put the entire program at risk. The banking syndicate involved, which in-
cluded all major U.S. banks in those days, was held together and provided
additional finance Trough a very difficult and trying period for Be company
and Be banks involved.
The point to be stressed is that in several crucial phases of the development
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JOHN S. REED and GLEN R. MOFUENO
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THE ROLE OF LARGE BANKS IN FINANCING INNOVATION
463
LARGE FINANCIAL INSTITUTIONS AS GLOBAL INTERMEDLARES
The rapid development of global, integrated capital markets may provide
the long-term solution to large-scale funding needs of the new technologies.
That integration is being driven by the world's leading commercial and
investment banks.
The grown of the international capital markets has, of course, been dra-
madc over He past two decades. Total international bank lending, for ex-
ample, has been estimated by the BIS at roughly $1.2 trillion at the end of
1983. This large Eurocredit market has been supplemented In recent years
by market developments, which clearly suggests the emergence of a single,
global, integrated capital market. Eurobond borrowing, for example, was
until recently a relatively small portion of the worId's capital markets reserved
for public sector borrowers and He very best known international companies.
It has now become an important source of finance for many corporate bor-
rowers, including U.S. companies. International bond issues by U.S. com-
pan~es tripled in 1984 to U.S. $24 billion out of total Eurobond issues of
over U.S. $100 billion. The introduction of note-issuance facilities over the
past year suggests the beginning of an international commercial paper market.
A key development is the emergence of a variety of innovative arbitrage and
hedging techniques (interest rate and currency swaps, financial futures, and
currency options, to name just a few). These provide growing linkages be-
tween the world's major capital markets and enable technology companies
to search for capital across He globe.
Examples of this trend abound:
· Wang Laboratories has raised funds in the Swiss franc convertible bond
market.
· Sperry has borrowed In the Swiss franc straight bond market with a
novel repayment feature In dollars.
· United Technologies and Intel have borrowed in the Euro-yen market,
swapping the proceeds back into dollars.
The significance of these developments is Hat savings are moving among
the world's venous capital markets, sumulating the flow of capital from
where it is produced to where it can be most gainfully employed. This is
particularly evident in He case of Japan, a traditional high-savings county,
which is exporting savings to the United States at a rate that substandaBy
offsets its heRy trade surplus win us. Indeed, He flow of foreign capital
into He United States over the past few years is ready evidence of the
importance of He world's capital markets to U.S. investment and He at-
tractiveness of U.S. investment oppornanides to the international investor.
The world's leading banks and investment banks play a crucial role in this
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JOHN S. REED and G.' FN R. MORENO
process through the underwriting and distribution of international securities
and the provision of arbitrage mechanisms between the various markets.
This phenomenon is not limited to the debt markets alone. In the past
2 years, some major equity issues have crossed national boundaries. It is not
surprising that they have been concentrated in the information and telecom-
munications industries, where innovation and investment rates are particularly
high.
The Reuters, Telerate, and Telecom public equity offenngs, all very large
by historical standards, show the ability of the U.S. and British markets to
respond, even simultaneously, to major demands for risk capital. These
transactions are probably indicative of future trends. Spain's private tele-
communications company, Telefonica, has already announced plans for in-
itial public equity issues in the world's major stock markets.
U. S . bank holding companies play a significant role in these capital markets
through their investment-banking affiliates. Traditionally strong in the Eu-
rocredit and Eurosecurities market, these affiliates are increasingly active in
the worlds stock markets. Unfortunately, banking regulation in the United
States prevents the banks from providing in this country fund-raising services
that are routinely provided abroad.
These developments in the international capital markets probably provide
the most striking example of the impact of financial innovation by large
institutions on the funding alternatives available to companies around the
world. The pace of change has been hectic, but the results are quite consistent:
companies today have far wider access to a variety of sources and fonns of
finance than at any time in the past.
CONCLUSIONS
This chapter has outlined key aspects of die role of large financial insti-
tutions in supporting technological innovation. It is clear that these institutions
support technological innovation in many ways: as users of technology,
venture capitalists, equity underwriters, lenders, advisers and consultants,
project financiers, and conduits to the international capital markets.
It is equally clear that financial institutions play Heir most valuable role
as innovators developing new and creative financial techniques to meet the
increasingly large and complex needs of corporate enterpnses. As He demand
for funds for technological innovation has increased, new financial mecha-
nisms have been developed to satisfy them, and risk has been to a great
extent actuarially dispersed.
It is fair to conclude Hat "financial innovation does support technological
innovation." A sensible goal of public policy is, therefore, to encourage the
development of a responsive and innovative financial system.
There is much evidence Hat policymakers around He world are moving
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THE ROLE OF LARGE BANKS IN FINANCING INNOVATION
465
toward this conclusion. In the United Kingdom, the development of a de-
regulated and freely competitive financial system is seen as a critical ingre-
dient in London's continuing preeminence as an international service center
and in the ability of British industry to access funds in globally competitive
terms. In West Germany, where the banking system has always been rela-
t~vely free and competitive, there is a growing focus on the need to enhance
competition and depth in the equity markets indeed, half of all new West
German equity issues since the war have been introduced in the past 2 years.
France has declared its support for the development of a private venture
capital industry, and Italy is using, privatization of public sector industries
to help stimulate a more active equities market. Even in Japan traditional
market structures are changing, and the potential effects on that nation's and
the world's borrowing and investment patterns are significant.
All of these policy initiatives reflect a growing awareness that responsive,
innovative capital markets are key ingredients to economic growth. This
trend in public policy dovetails win much more fundamental forces at work
in the world's financial markets. Infonnation technologies have broken Cough
the traditional market barriers of geographic distance, special cartels, and
exclusive market trading "floors " These technologies are bypassing cartel
and regulatory segmentation of the financial markets and leading to inte-
grated, competitive financial institutions. And, as we have seen, we are
moving quite rapidly toward an integrated global capital market. This con-
vergence of policy and market trends is encouraging, but we cannot take the
pace of deregulation for granted.
In He United States, the remaining panoply of financial regulation impedes
innovation by maintaining artificial competitive barriers. Anachronisms like
the venous prohibitions on interstate banking and the artificial division be-
tween commercial and investment banking stand in stark contrast to the
rapidly evolving global financial markets that this chapter descnbes. Indeed,
most of these regulations predate He very existence of the technologies and
industries that drive our economy today. Continuing critical review and
reform of financial regulation in this county remain a key priority if we are
to succeed in creating a truly innovative financial system capable of meeting
the challenges of funding technological innovation in the last 15 years of
this century.
NOTES
1. Of rice of Technology Assessment. 1984. information Technology on Financial Services Systems.
Washington, D.C.: U.S. Government Printing Office.
Peter F. Drucker. 1984. Our entrepreneurial economy. Harvard Business Review 62(1):
58-64.
3. Nathan Rosenberg. 1982. Inside Ike Black Box: Technology and Economics. New Yorlc: Cam-
bridge University Press.
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Representative terms from entire chapter:
financial institutions
