Finance-technology complementarities: An organizational equilibria approach

• A generalization of Williamson's contribution on the influence of technology on financial structure.
• An extension of the organizational equilibria approach to the analysis of the institutional complementarities between finance and technology.
• A novel argument favoring financial regulations.
• A new perspective to analyze the different varieties of capitalism.
• A formal model to understand the multiplicity of finance technology organizational equilibria.

Unlike many pre-crisis contributions, Oliver Williamson emphasized how different investment projects involve different forms of governance. According to him, their specificity contents define and separate the appropriate conditions for debt and equity governances. Our paper extends his contribution by arguing that, while the degree of specificity of the technology influences the choice of the governance, also the reverse is true: equity and debt governances involve different degrees of specificity. Thus, we have to deal with finance-technology complementarities, which can generate multiple organizational equilibria. Their possible inefficiency provides an argument for regulating the limits of each form of governance and for understanding the variety of arrangements existing in real life economies.