ABSTRACT
The chapter focuses on development financial institutions (DFIs) in Europe, that is public sector or government-invested legal entities with an explicit policy mandate to promote the socio-economic goals in a region, sector or specific market segment. DFIs play a relevant role in the economy, since they provide financial services to strategic sectors, sustain growth during period of recession, and invest in physical and technological infrastructures. Besides, more recently, they are increasingly addressing their activity to yield social payoffs and positive externalities for society as a whole, such as stimulating technology innovation and channelling funds to long-term global societal challenges such as climate change, renewable and environmentally friendly energy, and food security. In spite of their role in the economy, DFIs have not deserved any proper attention in the academic literature and they remain a quite under-analysed phenomenon. This chapter aims to fill this gap with a detailed analysis of firm-level characteristics and activities of contemporary European DFIs. Specifically, we introduce the phenomenon of development banks, explain the traditional theoretical framework where the existence of DFIs is discussed and why they represent a rising and important component of state capitalism. We also describe the characteristics of contemporary DFIs in Europe and discuss their growing role in funding innovation and supporting a response to global and new societal challenges. Finally we present the empirical analysis, which aims at discussing the role of DFIs as vehicles for state intervention in several sectors, with a specific focus on their strategic support to innovation. The dataset includes 132 entities, that is all the DFIs headquartered in Europe. Among them, eight are supranational, like the European Investment Bank, while others are ultimately controlled by national (or even regional or local) governments. Economic and financial indicators are from Orbis, while information on DFIs’ mission, lending and funding activities, target industries and markets are collected case-by-case from annual reports, websites and all publicly available information.
