Innovation, competition and financial vulnerability in economic development

Vol. 25 No. 2 (2005)

Apr-Jun / 2005
Published April 1, 2005

How to Cite

Burlamaqui, Leonardo, and Jan Kregel. 2005. “Innovation, Competition and Financial Vulnerability in Economic Development”. Brazilian Journal of Political Economy 25 (2):5-22.

Innovation, competition and financial vulnerability in economic development

Leonardo Burlamaqui
Professor of the Law Graduate Program at Candido Mendes University and Adjunct Professor of Political Economy at the State University of Rio de Janeiro
Jan Kregel
Senior Inter regional Adviser, United Nations Conference on Trade and Development, respectively
Brazilian Journal of Political Economy, Vol. 25 No. 2 (2005), Apr-Jun / 2005, Pages 5-22


The financial sector has been viewed traditionally as either providing the “oil” for the “wheels of commerce” or as a parasite on the real sector of the economy where real productivity gains provide for increasing real wages and per capita incomes. The present paper takes a different route and attempts to an analysis of financial institutions on a par with the production sector of the economy. It also develops a link which amalgamates “the knowledge-based” perspective on firms’ operations with Schumpeterian financial leverage to exploit productivity enhancing innovations, and Minsky’s tendency towards financial fragility. The analysis also leads to some policy recommendations concerning financial regulation, risk management and financial institution’s building.

JEL Classification: F, F02, F37, F4, O20.

Keywords: Business Organization Competition in Finance financial Innovation Financial Fragility Development Policies