Innovation Dynamics and Financialisation: Is Another Regulation Possible to Re-Industrialise the Economy?

Innovation is the source of capitalist accumulation. Schumpeter termed this process ?Creative Destruction? and related it to entrepreneurial activities and to the functioning of the monetary and financial system. Recent research on economic development has also placed the emphasis on financial innovations and financial markets. The financial liberalisation era of the 1990s and 2000s is regarded as a growth period and a positive relationship is assumed between financial innovations and entrepreneurial innovations. However, financial innovations provoked an economy-wide financialisation, reduced the share of real entrepreneurial activities and generated systemic crises. The subsequent turmoil hampered the access of innovative projects to stable financial resources. This article maintains that in order to set the economy on a re-industrialisation path, an alternative organisation of financial markets is required. I then suggest some directions for possible relevant recovery policies and argue that an alternative re-industrialisation/de-financialisation process calls for a specific public regulation that should seek to lead financial institutions to finance sustainable innovative activities in order to ensure global recovery and prevent systemic catastrophes. JEL Codes: G18, G20, O31, O38