Financial organizations: an overlooked element in regional innovation systems

Financial organizations are a vital element in the regional innovation ecology. However, they are mostly absent in accounts of regional innovation systems. This chapter addresses this gap by exploring how different financial organizations contribute to economic renewal and new path development in four Norwegian regions. The study is guided by an evolutionary perspective on regional industrial development, invoking the concepts of path dependence and new path development. We investigate how financial organizations contribute to five different regional trajectories: path extension, path upgrading, path importation, path branching and new path creation. This chapter discusses the role of a differentiated set of financial organizations, including banks, venture capital, seed capital and wealthy individuals. Our study offers micro-level insights in the behavior of financial organizations to support various forms of path development. We find that banks primarily support path extension and path upgrading and to some degree path importation and branching. Venture capital has evolved from risk taking entities financing start-ups into private equity funds primarily engaging in buy-outs and restructuring of existing industries. Seed capital to fund new paths is scarce.