The paper explores the development of a radical financial innovation, securitization. This innovation changed the context for all actors in the financial industry repeatedly to such a degree that even the highest regarded experts repeatedly made prediction errors. The negative effects of prediction errors have since 1980 gradually became larger until today when even a single individual decision by a portfolio manager may risk global financial mayhem. The conclusion is that financial innovation has become a lot riskier than is commonly appreciated in economic theory and practice. Our limited ability to foresee the consequences of our actions are fundamental to innovation and product development. Unintended and undesired outcomes should be acknowledged as an untapped resource for improving the net effects of innovation.
|Title of host publication||The Proceedings of The Innovation for Financial Services Summit : Luxembourg, Grand-Duchy of Luxembourg - 21-23 September 2011|
|Place of Publication||Luxembourg|
|Publisher||Public Research Centre Henri Tudor|
|Publication status||Published - 21.09.2011|
|MoE publication type||A4 Article in conference proceedings|
|Event||The Innovation for Financial Services Summit - Luxembourg, Luxembourg|
Duration: 21.09.2011 → 23.09.2011
- 511 Economics
- 512 Business and Management
Sveiby, K-E. (2011). Innovation and the Global Financial Crisis: Consequences of Incompetence. In The Proceedings of The Innovation for Financial Services Summit: Luxembourg, Grand-Duchy of Luxembourg - 21-23 September 2011 Public Research Centre Henri Tudor .