14 Jul 2009

Finance, innovation and growth - €1.49M for new research on Europe’s financial sector led by the OU

The Open University has been awarded €1.49 million by the European Commission to co-ordinate FINNOV – a new research project aimed at understanding the sources, implications and management of positive and negative changes in financial markets. The research findings will be used to inform financial policy and innovation policy at the national and transnational level.

Professor Mariana Mazzucato of The Open University is co-ordinating the research project and said: “As has been made clear by the current financial crisis, our economy is more vulnerable than we think. Not enough is understood about the influences and interactions between the financial sector and other elements. Understanding more about this relationship, at the level of different sectors and countries, will allow us to better stabilise European economies in the future.”

The three-year project is funded by Theme 8 of the Seventh Framework Programme of the European Commission under the topic ’The role of finance in growth, employment and competitiveness in Europe’. The project will examine the link between the financial sector and the real economy (e.g. innovation, investment and growth), asking challenging questions such as whether the sector has facilitated or impeded industrial innovation. The Open University will co-ordinate a consortium of institutions from across Europe: University of Cambridge, UK; Sant'Anna School of Advanced Studies, Italy; Polytechnic University of Marche, Italy; Economics Institute, Czech Republic; University of Bordeaux, France; and University of Sussex, UK.

Professor Mazzucato says innovation is key to recovery: “The long-term economic performance of Europe depends on its ability to generate new knowledge and inventions, and then to translate inventions into economic adaptation and growth. Recent research has highlighted the critical role played by the supply of appropriate forms of finance within this process. FINNOV’s research will improve understanding of the sources and roles of financial innovations within the wider economy, the changing roles of the financial system, and the implications of these changes for the social distribution of risks and rewards.”

FINNOV will study how links across the economy influence economic growth, examining the experience of individuals, businesses and the wider economy. The challenge is to understand the complex role of finance in the dynamics of the real economy and investigate how differences (such as those in shareholder attitudes) between the institutions and the economic participants (e.g. investors, shareholders and consumers) involved govern this relationship.

Findings from the research will be disseminated at a national and international level, towards policy makers, Non-Governmental Organisations (NGOs) and key industries such as IT, biotech and pharmaceuticals.

Notes to editors:
The FINNOV project has been funded through Theme 8 of the Seventh Framework Programme of the European Commission (Socio-Economic Sciences and the Humanities), under the topic "The role of finance in growth, employment and competitiveness in Europe (SSH -2007 - 1.2.3)”. The 3 year project started March 1, 2009 (total EC contribution €1,494,870).
Each institution is leading one of the seven policy relevant work packages which explore critical links between finance, innovation and economic growth. Areas to be explored include the role of venture capital and stock markets in supporting innovative firms; the links between firm innovation and financial performance; interactions between financial systems, firm bankruptcy and employment; the effects of house bubbles on consumption; and understanding the implications of innovation in financial services on the long-term development of financial services sector.

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