Abstract

The financial sector is gaining growing attention in the economic literature about innovation. However, its centrality in the innovative process, though formally stated, has been then neglected by much of the literature. The present work aims at presenting the most important theoretical and empirical contributions to the analysis of innovation in the financial sector on the background of the dispute between the neoclassical view and the evolutionary approach. After providing a definition of financial innovation and a brief overview over the dispute between the neoclassical and the evolutionary approach the paper examines some possible explanations for the lack of literature in the field and presents the Industrial Organization approach as the richest source of studies about financial innovation. However, this approach doesn't seem to be the most promising for future research, due to some limits highlighted in the paper. The paper then taxonomizes the functions of new financial products, presents the scientific works that deepen each of the described function and reviews latest contributions to the analysis of innovation in the financial sector are presented. Finally some possible developments are suggested, identifying the evolutionary approach as more promising for future research.