The New Economy and Financial Change in Europe

It was inspired by the flood of new evidence from the last five years pointing to significant social and economic activities that are not traditionally associated with European political economies. Some of the surprising "new economy" developments include an unprecedented amount of venture capital investment channeling into entrepreneurial firms, a rapid opening of capital markets to young firms formerly limited to national bank lending, and high levels of household wealth flowing into high-risk instruments. Early evidence suggests these and other new patterns are affecting career choices and retirement expectations, and have the potential to shape political identities and add fuel to debates about wealth distribution and the future of the welfare state.

The research group focuses on change in financial institutions as a vehicle for understanding new economic, social and political activities. Earlier literature uncovered core relationships between national financial systems, on the one hand, and public policies and social activities, on the other. Scholars in this tradition demonstrated that they could infer defining features of a society through the study of its financial system. Focusing on financial institutions, individual research papers will evolve around three core sets of questions:

1. Whether the categories of institutional change in finance developed in earlier decades still captures the essence of European financial change in the 21st century
2. The causal relationships between institutional change in finance and the emergence of new social and economic activities
3. The causes of the contemporary financial change.

The recent collapse in stock prices and the recession in high technology sectors have revealed gaps in the ability of European regulations and institutions to support new economy activities. Participants seek to take advantage of the current lull to conduct frank discussions among European venture capitalists, executives of the European exchanges, regulators and academics about future public policies at the EU and national levels.

Researchers in this project gathered for a planning session in the Fall of 2001, and have organized a speaker series focused on these questions that will run throughout the academic year. In the Spring semester 2002, the conveners will hold a conference to present their preliminary findings. The conference, thus far entitled "Venture Capital, New Markets, and Corporate Governance," will take place in Brussels.