The Development Of The Merchant Advance Industry As An Example Of Innovation In The Financial Markets

Abstract

The capital markets, like all areas of business, evolve over time. This evolution is often made possible by the application of technology. In particular, stock and bond markets, as well as options, commodities and derivatives markets, have all undergone enormous and rapid transformations due to the application of technology (Gurbaxani & Whang, 1991; Carlsson & Stankiewicz, 1995).

These transformations, because of economies of scale, have benefited large businesses more than small businesses. This article 1) outlines the development of a new form of financing for small business that has become possible as a result of technological innovation, 2) describes why it has advantages in some circumstances over existing forms of financing, and 3) examines why the existence of this form of financing may have positive effects in terms of job creation.