Competition and Innovation in the Financial Sector: Evidence from the Rise of FinTech Start-ups

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Title: Competition and Innovation in the Financial Sector: Evidence from the Rise of FinTech Start-ups
Authors: Caragea, DoinaCojoianu, TheodorDobri, MihaiHoepner, AndreasPeia, Oana
Permanent link: http://hdl.handle.net/10197/12774
Date: Jan-2022
Online since: 2022-02-28T16:30:29Z
Abstract: We provide new evidence on the effects of competition on incumbents' innovative behavior by examining the rise of FinTech start-ups over the period 2000-2016. We employ machine learning techniques to classify a large global sample of patent applications into five FinTech categories. We exploit the variation in the share of FinTech patent applications by non-financial startups to incumbent financial firms to measure competitive pressures from outside the financial industry. We show that higher competitive pressures from non-financial start-ups increases the probability that financial incumbents innovate. Moreover, competition from start-ups results in a higher number of FinTech patent applications by financial incumbents as compared to non-financial firms, especially when the innovations of FinTech start-ups are more important, as proxied by future patent citations count.
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Start page: 1
End page: 39
Series/Report no.: UCD Centre for Economic Research Working Paper Series; WP2022/01
Copyright (published version): 2021 the Authors
Keywords: FinTechPatentsMachine learningFinancial incumbentsInnovation
JEL Codes: G20; G21; O31
Language: en
Status of Item: Not peer reviewed
This item is made available under a Creative Commons License: https://creativecommons.org/licenses/by-nc-nd/3.0/ie/
Appears in Collections:Economics Working Papers & Policy Papers

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