ICT Innovation and Economic Performance : The Role of Financial Intermediation

This article considers the relationship between finance and the contribution of Information and Communication Technologies (ICT) to macroeconomic performance. The general characteristics of ICT firms, especially their often 'high risk, high return' nature, suggest equity finance is more appropriate than debt finance. Also, the prevalence of information asymmetries tends to favour internal finance and venture capital with management participation. For a group of countries, we analyse correlations between financial structure and the ICT contribution to economic growth. Our results support the view that a market-oriented financial system and a well-developed venture capital market are key factors stimulating the emergence of the so-called 'New Economy'. This helps explain the considerable gap in productivity growth between the United States and Europe in the second half of the 1990s