ABSTRACT
Two lines of research have demonstrated that excessive financial development can negatively impact technological innovation. The first mechanism of the negative effects of financial development on innovation is related to the “managerial myopia” hypothesis. The second mechanism discussed in the literature through which corporate innovation may be held back is based on the “financialization” hypothesis. Recent studies synthesizing the managerial myopia and financialization hypotheses has built on research into the relationship between financialization, managerial myopia, and technological innovation. This chapter looks at how deeper financialization negatively impacts investment in intangible assets, including R&D investment. These studies find that financialization can interfere with corporate innovation strategy through the three channels. The first two channels explain how financialization negatively impacts technological innovation by reducing investment in R&D and intangible assets. However, the third mechanism suggests that financialization can also change the nature of corporate innovation strategy itself.
