Understanding financial innovation systems: Veblen and Minsky at the periphery

Setting off from an Evolutionary perspective, this paper debates key aspects of the process of financing innovation based on Keynes's asset choice model within the context of Minsky's cycle and the Institutionalist approach of Veblen. Innovative activity is surrounded by great uncertainty because firms invest funds for the long term without being sure whether they will earn high returns. As a result, firms run into additional obstacles when trying to obtain financing to develop new technologies. This difference becomes clearer when developed countries (USA) and less-developed countries (Brazil) are compared. The higher the level of uncertainty in world markets, the lower the amount of funds available to finance innovation; and this situation is accentuated in less-developed countries because they do not have a mature financial system capable of supporting innovation risks.