Role of Stock Markets in Stimulating Innovation Processes

DOI: 10.20542/0131-2227-2020-64-11-31-41
Z. Mamedyarov (,
Primakov National Research Institute of World Economy and International Relations, Russian Academy of Sciences (IMEMO), 23, Profsoyuznaya Str., Moscow, 117997, Russian Federation

Abstract. The paper deals with the role of the stock market in innovative development, basically in case of the U. S. The author shows how the NASDAQ has provided tangible financial incentives for growth of high-tech industries, emphasizes the relationship between innovation and the financial sector, the importance of competition for capital in technological development. It is shown that the development of NASDAQ and increased competition of stock markets allowed high-tech U.S. companies to benefit from country’s strong financial sector and specialized market structures. The prerequisites for the successful emergence of biotech and ICT start-ups, as well as the venture market in the U.S. are still strongly connected with stock markets. However, the comparative analysis also revealed growing global competition from the Chinese stock markets. At the same time, in the last decade a new bubble is emerging on the U.S. stock market, which, as shown by the analysis of the median revenues of the major companies, differs from similar situations before the dot-com crisis and before the 2008–2009 crisis. Revenues of the largest companies in recent years have been growing along with their capitalization, which suggests that the bubble may take much longer to collapse than before. The author also shows the intensification of competition between stock exchanges and over-the-counter financing mechanisms for innovative companies: SME acquisitions by major corporations, intensification of mergers and acquisitions around the world. The role of mergers and acquisitions, which have become an alternative to IPOs, has become increasingly important over the past decade as a financing mechanism for innovative companies. In the last decade, the ICT-companies have dominated by market capitalization and gained sufficient market power to meet the demand for new developments and acquisitions of start-ups. This over-the-counter financing mechanism increases market uncertainty and may contribute to suboptimal solutions in the high-tech sector. However, the author found that the observed decline in U.S. IPOs is primarily affecting the ICT sector, while pharmaceutical and biotech companies continue to be actively listed.

Keywords: innovations, high-tech companies, capital raising, innovative competition, stock market


  1. Prange C., Zhao Y. Strategies for Internationalization: How Chinese SMEs Deal with Distance and Market Entry Speed. Key Success Factors of SME Internationalisation: a Cross-Country Perspective. Bingley, Emerald Publishing, 2018, pp. 205-224. DOI: 10.1108/S1876-066X20180000034012
  2. Schumpeter J.A. The Theory of Economic Development. Oxford, Oxford University Press, 1961. 118 p.
  3. Knight F. Risk, Uncertainty and Profit. Boston, Hart, Schaffner & Marx, 1921. 394 p.
  4. Frey C.B. Intellectual Property Rights and the Financing of Technological Innovation: Public Policy and the Efficiency of Capital Markets. Cheltenham, Edward Elgar Publishing, 2013. 304 p.
  5. Perez C. Tekhnologicheskie revolyutsii i finansovyi kapital. Dinamika puzyrei i periodov protsvetaniya [Technological revolutions and financial capital. The dynamics of bubbles and golden ages]. Moscow, Delo, 2011. 232 p.
  6. Raiskaya N.N., Sergienko I.V., Frenkel’ A.A. Fondovyi rynok v sisteme finansirovaniya investitsii i innovatsii [Stock market in the system of investments and innovations financing]. Mirovaya ehkonomika i mezhdunarodnye otnosheniya, 2007, no. 11, pp. 30-35.
  7. Lazonick W., O’Sullivan M. Maximizing Shareholder Value: a New Ideology for Corporate Governance. Economy and Society, 2000, vol. 29, no. 1, pp. 13-35.
  8. Jensen M.C. Value Maximization, Stakeholder Theory, and the Corporate Objective Function. Journal of Applied Corporate Finance, 2001, vol. 14, no. 3, pp. 8-21.
  9. Bekaert G., Harvey C.R., Lundblad C.T. Equity Market Liberalization in Emerging Markets. Journal of Financial Research, 2003, vol. 26, no. 3, pp. 275-299.
  10. Levine R., Zervos S. Stock Market Development and Long-run Growth. World Bank Economic Review, 1996, vol. 10, no. 2, pp. 323-339.
  11. Brown J.R., Martinsson G., Petersen B.C. Law, Stock Markets, and Innovation. The Journal of Finance, 2013, vol. 68, no. 4, pp. 1517-1549.
  12. Sanger G., McConnell J.J. Stock Exchange Listings, Firm Value, and Security Market Efficiency: the Impact of NASDAQ. Journal of Financial and Quantitative Analysis, 1986, vol. 21, no. 1, pp. 1-25.
  13. McConnell J.J., Servaes H. Additional Evidence on Equity Ownership and Corporate Value. Journal of Financial Economics, 1990, vol. 27, no. 2, pp. 595-612.
  14. Lazonick W. The US Stock Market and the Governance of Innovative Enterprise. Industrial and Corporate Change, 2007, vol. 16, no. 6, pp. 983-1035.
  15. Heckman L. NASDAQ: a Guide to Information Sources. New York, Routledge, 2013. 157 p.
  16. Moore S., Kerpen P. A Capital Gains Tax Cut: the Key to Economic Recovery. Institute for Policy Innovation. Available at: (accessed 07.08.2020).
  17. Morgan J. Private Equity Finance: Rise and Repercussions. London, Palgrave Macmillan, 2008. 309 p.
  18. Giudici G., Roosenboom P. The Rise and Fall of Europe’s New Stock Markets. Bingley, Emerald Publishing, 2004. 372 p.
  19. Francis J., Schipper K. Have Financial Statements Lost Their Relevance? Journal of Accounting Research, 1999, vol. 37, no. 2, pp. 319-352.
  20. Franke M., Löffler G. A Long Run Performance Perspective on the Technology Bubble. Financial Review, 2018, vol. 53, no. 2, pp. 379-412.
  21. Mergers and Acquisitions Statistics. IMAA Institute, 2020. Available at: (accessed 07.08.2020).
  22. Gao X., Ritter J.R., Zhu Z. Where Have All the IPOs Gone? Journal of Financial and Quantitative Analysis, 2013, vol. 48, no. 6, pp. 1663-1692.
  23. Ritter J.R. Initial Public Offerings: Technology Stock IPOs. Gainesville (Fl.), Warrington College of Business, 2020. 14 p.
  24. EY Global IPO Trends: Q4 2018. London, EY, 2018. Available at: (accessed 07.08.2020).
  25. Dambra M., Field L.C., Gustafson M.T. The JOBS Act and IPO Volume: Evidence that Disclosure Costs Affect the IPO Decision. Journal of Financial Economics, 2015, vol. 116, no. 1, pp. 121-143.
  26. Blevins D.P., Ragozzino R., Reuer J.J. How the JOBS Act Is Reshaping IPOs: Implications for Entrepreneurial Firms. Academy of Management Perspectives, 2017, vol. 31, no. 2, pp. 109-123.
  27. World Federation of Exchanges Database. Available at: (accessed 07.08.2020).

Registered in System SCIENCE INDEX

For citation:
Mamedyarov Z. Role of Stock Markets in Stimulating Innovation Processes. World Eonomy and International Relations, 2020, vol. 64, no. 11, pp. 31-41.

Comments (0)

No comments

Add comment






Dear authors! Please note that in the VAK List of peer-reviewed scientific journals, in which the main scientific results of dissertations for the degree of candidate and doctor of sciences should be published for the “MEMO Journal” the following specialties are recorded:
economic sciences:
5.2.5. World Economy.
5.2.1. Economic Theory
5.2.3. Regional and Branch Economics
political sciences:
5.5.4. International Relations
5.5.1. History and Theory of Politics
5.5.2. Political Institutions, Processes, Technologies


Current Issue
2024, vol. 68, No. 5
Topical Themes of the Issue:
  • Are There Any Ways to Break Through the Korean Nuclear Impasse?
  • Contemporary U.S. Taiwan Policy: Balancing on the Edge
  • The Gulf Monarchies’ Vision of the Global Order Transformations and the Russian Place in It
  • At Post-Soviet Space
Submit an Article
The Editorial Board invites authors to write analytical articles on the following topics:
  • changes in the processes of globalization in modern conditions
  • formation of the new world order
  • shifts in civilization at the stage of transition to a digital society

The editors are also interested in publishing synthesis articles / scientific reviews revealing the main trends in the development of certain regions of the world - Latin America, Africa, South Asia, etc.