Information technology, venture capital and the stock market

Abstract This paper investigates the relationship between information technology and the capital markets. The central analytical and policy question addressed here is what kind of financial system or capital market arrangements are most conducive to fostering information technology and its use in the economy. This question is closely related to an old debate about the relative virtues of the Anglo-Saxon financial system based on stock markets, and the German/Japanese bank-based financial model. Which system should developing countries attempt to emulate to foster their economic growth and technological development? This debate has recently taken a fresh turn with the apparent emergence of the “New Economy” in the U.S. The U.S. has not only experienced fast growth of ICT industries but there has also evidently been widespread successful adoption of ICT technology in many areas of the economy. It is suggested that a major reason for the U.S. lead in this area, and the apparent European and Japanese lag, has been the very important enabling and stimulating role of the stock market.