SFeDu
of.211, Gorgoko St., 88 
Rostov-on-Don
Russia
344002
+7 (863) 250-59-54
This email address is being protected from spambots. You need JavaScript enabled to view it.
te@sfedu.ru

TERRA ECONOMICUS

  • Home
  • Issues
  • 2023
  • No 1
  • An empirical analysis of the influence of financialization on the innovative activity of the firms’ managers in Italy

An empirical analysis of the influence of financialization on the innovative activity of the firms’ managers in Italy


TERRA ECONOMICUS, , Vol. 21 (no. 1),

This paper contributes to the discussion about the impact of financialization on the innovative activity of firms. The initial hypothesis was whether financialization has negative impact on the innovative activity of a company as a consequence of investment short-termism of managers who are not motivated to invest in risky innovative initiatives with a long payback period. Assumptions are made through analyzing the relationship between financial indicators (financial expenses and incomes) and investments in research and development on the sample of Italian publicly listed non-financial corporations. The article tests whether financialization leads to short-termism of company managers forcing them not to invest in risky innovative initiatives with a long payback period. Econometric analysis reveals that financial income of Italian non-financial companies was found to be positively associated with their R&D expenses. This finding may support the economic theory of the mainstream literature, which argues for the beneficial effects of financialization on the economic growth and is inconsistent with many empirical results received by the Post Keynesian authors. The possible reason for it is that the motivation of the Italian managers may be different from the Anglo-Saxon managers’ one and not characterized by the shareholder value orientation and short-termism.
Citation: Tarverdyan M., Rozmainsky I. (2023). An empirical analysis of the influence of financialization on the innovative activity of the firms’ managers in Italy. Terra Economicus 21(1), 61–79. DOI: 10.18522/2073-6606-2023-21-1-61-79


Keywords: financialization; innovation; investment; R&D; corporate management; Italy

JEL codes: C23, D22, G30

References:
  • Alvarez, I. (2015). Financialization, non-financial corporations and income inequality: the case of France. Socio-Economic Review 13(3), 449–475.
  • Álvarez, N. (2012). The financialization of the Spanish economy: Debt, crisis and social cuts. In: Workshop on Debt, organized by Rosa Luxemburg Stiftung, Berlin.
  • Amara, N., Landry, R. (2005). Sources of information as determinants of novelty of innovation in manufacturing firms: evidence from the 1999 statistics Canada innovation survey. Technovation 25(3), 245–259.
  • Archibugi, D., Pianta, M. (1996). Innovation surveys and patents as technology indicators: the state of the art. In: Innovation, Patents and Technological Strategies. OECD.
  • Arellano, M., Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies 58(2), 277–297.
  • Arrighi, G. (1994). The Long Twentieth Century: Money, Power and the Origins of Our Times. Verso.
  • Barradas, R., Lagoa, S., Leão, E., Mamede, R. (2018). Financialization in the European periphery and the sovereign debt crisis: The Portuguese case. Journal of Economic Issues 52(4), 1056–1083.
  • Battiston, S., Guerini, M., Napoletano, M., Stolbova, V. (2018). Financialization in the EU and its Consequences. Sciences Po publications. info:hdl:2441/4q63gsp61h8, Sciences Po.
  • Becheikh, N., Landry, R., Amara, N. (2006). Lessons from innovation empirical studies in the manufacturing sector: A systematic review of the literature from 1993–2003. Technovation 26(5-6), 644–664.
  • Bukvić, R., Ocić, Č. (2013). Financialization and modern economic crises. Vestnik NGIEI 4(3), 3–17.
  • Cecchetti, S., Kharroubi, E. (2012). Reassessing the impact of finance on growth. BIS Working Paper No. 381.
  • Cibils, A., Allami, C. (2013). Financialisation vs. development finance: The case of the post-crisis Argentine banking system. Revue de la Régulation. Capitalisme, Institutions, Pouvoirs (13).
  • Davanzati, G., Pacella, A., Salento, A. (2019). Financialisation in context: The case of Italy. Cambridge Journal of Economics 43(4), 917–936.
  • Davis, L. (2017). Financialization and investment: A survey of the empirical literature. Journal of Economic Surveys 31(5), 1332–1358.
  • Davis, L. (2018). Financialization and the nonfinancial corporation: An investigation of firm-level investment behavior in the United States. Metroeconomica 69(1), 270–307.
  • De Luca, G. (2002). Le Società Quotate alla Borsa Valori di Milano dal 1861 al 2000. Profili Storici e Titoli Azionari. Libri Scheiwiller.
  • Dosi, G., Revest, V., Sapio, A. (2016). Financial regimes, financialization patterns and industrial performances: preliminary remarks. Revue d’économie industrielle (154), 63–96.
  • Dziallas, M., Blind, K. (2019). Innovation indicators throughout the innovation process: An extensive literature analysis. Technovation 80, 3–29.
  • Epstein, G. (ed.) (2005). Financialization and the World Economy. Edward Elgar Publishing.
  • Fazzari, S., Mott, T. (1986). The investment theories of Kalecki and Keynes: An empirical study of firm data, 1970–1982. Journal of Post Keynesian Economics 9(2), 171–187.
  • Ficcadenti, C. (2020). The financialization of the Italian welfare system: The case of Fondazione Cariplo. Working papers Dipartimento di scienze sociali ed economiche.
  • Fligstein, N. (1990). The Transformation of Corporate Control. Harvard University Press.
  • Flor, M., Oltra, M. (2004). Identification of innovating firms through technological innovation indicators: an application to the Spanish ceramic tile industry. Research Policy 33(2), 323–336.
  • House, R., Hanges, P., Javidan, M., Dorfman, P., Gupta, V. (2004). Culture, Leadership, and Organizations: The GLOBE Study of 62 Societies. SAGE Publishing.
  • Karwowski, E., Shabani, M., Stockhammer, E. (2017). Financialization: Dimensions and determinants. A cross-country study. Economic Discussion Papers 2017-1. School of Economics, Kingston University London.
  • Krippner, G. (2005). The financialization of the American economy. Socio-Economic Review 3(2), 173–208.
  • Kuzmina, A., Rozmainsky, I. (2020). The effect of financialization on investment by non-financial private sector in Spain: An empirical analysis. Journal of Institutional Studies 12(3), 60–82.
  • Lazonick, W. (2013). From innovation to financialization: How shareholder value ideology is destroying the US economy. In: Wolfson, M., Epstein, G. (eds.) Handbook of the Political Economy of Financial Crises. Oxford University Press: New York, pp. 491–511.
  • Lee, Y., Kim, H., Hwan Joo, S. (2020). Financialization and innovation short-termism in OECD Countries. Review of Radical Political Economics 52(2), 259–286.
  • Lin, K., Tomaskovic-Devey, D. (2013). Financialization and US income inequality, 1970–2008. American Journal of Sociology 118(5), 1284–1329. 
  • OECD/Eurostat/European Union (1997). Proposed guidelines for collecting and interpreting technological innovation data: Oslo Manual. The Measurement of Scientific and Technological Activities. Paris: OECD Publishing. DOI: 10.1787/9789264192263-en
  • Orhangazi, È. (2008). Financialization and the US Economy. Edward Elgar Publishing.
  • Osik, Yu. (2014). Deglobalization of the world economy as a consequence of its financialization. International Journal of Applied and Fundamental Studies (1-2), 202–205.
  • Politecnico di Milano (2022). Internet of things. https://www.osservatori.net/it/ricerche/osservatori-attivi/internet-of-things (accessed: May 26, 2022)
  • Ricci, G., Pallotta, G., Sirignano, A., Amenta, F., Nittari, G. (2020). Consequences of COVID-19 outbreak in Italy: Medical responsibilities and governmental measures. Front Public Health 8, 588852. Doi: 10.3389/fpubh.2020.588852
  • Rodrigues, J., Santos, A., Teles, N. (2016). Semi-peripheral financialisation: The case of Portugal. Review of International Political Economy 23(3), 480–510.
  • Rossi, U. (2013). On life as a fictitious commodity: cities and the biopolitics of late neoliberalism. International Journal of Urban and Regional Research 37(3), 1067–1074.
  • Rozmainsky, I. (2014). Hedonistic culture and global crisis. Terra Economicus 12(1), 28–40.
  • Salento, A. (2014). Financialization of companies and shareholder value maximization in Italy. Available at SSRN 2375113. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2375113
  • Simoni, M. (2020). Institutional roots of economic decline: Lessons from Italy. Italian Political Science Review 50(3), 382–297.
  • Sokol, M. (2017). Financialisation, financial chains and uneven geographical development: Towards a research agenda. Research in International Business and Finance 39, 678–685.
  • Stiglitz, J. (2019). People, Power, and Profits: Progressive Capitalism for an Age of Discontent. Penguin.
  • Stockhammer, E. (2004). Financialisation and the slowdown of accumulation. Cambridge Journal of Economics 28(5), 719–741.
  • Stockhammer, E. (2012). Financialization, income distribution and the crisis. Investigación Económica 71(279), 39–70.
  • Tavanti, M. (2012). The cultural dimensions of Italian leadership: Power distance, uncertainty avoidance and masculinity from an American perspective. Leadership 8(3), 287–301.
  • Tomaskovic-Devey, D., Lin, K. (2013). Financialization: Causes, inequality consequences, and policy implications. North Carolina Banking Institute 18(1), 167–194.
  • Tori, D., Onaran, Ö. (2018). The effects of financialization on investment: Evidence from firm-level data for the UK. Cambridge Journal of Economics 42(5), 1393–1416.
  • Tretyakov, D., Rozmainsky, I. (2021). An empirical analysis of the influence of financialization on investment in Russia. Russian Journal of Economics 7, 233–249.
  • Tridico, P., Pariboni, R. (2018). Inequality, financialization, and economic decline. Journal of Post Keynesian Economics 41(2), 236–259.
  • Van der Zwan, N. (2014). Making sense of financialization. Socio-Economic Review 12(1), 99–129.
  • Wang, C. (2019). A literature review on corporate financialization. American Journal of Industrial and Business Management 9(3), 647–657.
Publisher: Southern Federal University
Founder: Southern Federal University
ISSN: 2073-6606