Introduction

Financial systems allocate financial resources for technology innovation, directing the flow of the deposit of household sectors to the firms and assigning investment fund among different enterprises. Since 1990s, the success of“New Economy”in the US and financial crisis broken out in various Asian countries in succession have launched discussing warmly about which is better and, which is worse on bank-based financial system and market-based financial system in finance.Then, the view of the mainstream thought:“New Economy”has represented the new direction of economic development of the world, and the development based on the strong support of the“good”financial system.The“good”financial system should own effective legal system, good accounting standard, transparent monetary system, effective capital markets and normal corporate governance; all these are the characteristic of market-based financial system.Asian financial crisis taking place in the same term has confirmed the view from reverse side.Exactly based on this understanding, after the crisis takes place, the international community headed by IMF regards developing capital markets and reforming bank-based financial system as the best recipe of controlling crisis while succoring these countries（districts）.

However, in history of development of finance, financial intermediaries and financial markets grow together all the time.In addition, there are no unified answers about financial intermediaries and financial markets on earth which is even more important, which is more ef-ficient and, which one occupies leading position no matter in theory or on practice.In fact, about its role given play to in the whole financial system, financial intermediaries and financial markets are giving plays to the leading role alternatively.The development of human society is based on a series of technology innovation.Technological innovation, especially revolutionary technological innovation, such as the inventions of steam engine, electricity and IT, will cause economic structure to adjust violently through the industrialization of technology.This will inevitably put forward its particular need to financial industry.As everyone knows, the financial system can realize the transformation from saving to investment.But in this course, there are many kinds of transaction costs, such as informational collecting and dealing cost, screen cost, negotiation and renegotiation cost, monitoring cost, and confirmed cost.The basic role of the financial system is to reduce transaction costs.So the difference in efficiency, during reducing the transaction cost, is a basic thinking of comparing financial systems.

In this book we probe into the relationship between financial systems and technology innovation financing.On this basis, we further discuss the reform of financial system for promoting the technology innovation in china.Firstly, we analyze the different financing environments the technology innovation at three distinct stages——new technology development stage, technology promotion stage and technology improvement stage.At new technology development stage, new technology is not well -known, so investors have different prior beliefs. The presence of diversity of opinion hampers financing new technology development.When entered the technology promotion stage, the technology is well-known and investors have the same prior probability beliefs.At this point, whether to invest in a technology will depend on people's information, especially information about the other side. However, different individuals hold different information, that is, the existence of asymmetric information.Therefore, adverse selection and moral hazard resulting from asymmetric information will become the major reasons which hamper the technology to spread in the economies.The well -known technology is necessary to further improve. At technology improvement stage, there is uncertainty.This uncertainty will lead to investors and financiers had been unable to sign complete contracts on technology projects investment.Technology improvement financing is faced with the challenge of incomplete contract.At this point, some unsuccessful projects may be able to regain vitality if they can access to refinance.Therefore, the refinance can often be the key of the success or failure of technology improvement.

In this book, we have compared the different behavior of financial markets and financial intermediaries in financing technology innovation.We think that bank-based financial system and market-based financial system play a leading role alternatively for some reasons. When the new technology develops from unknown to well -known, market-based financial system shows the comparative advantage because it is apt to adopt the investment in risky new technologies. When mature technology large -scale spreads abroad, bank -based financial system shows the comparative advantage because it can give play to the economies of scale production effect and external effect. There is natural evolutionary progress of technology from immature to mature; also there are many complicated technologies in practical economy.The ideal financial system should meet the needs of them to financial services, that is, the function of ideal financial system should be complete at first.Meanwhile, the ideal financial system can follow the wants of different stages of technology evolution and different technologies for financial function, and arrange in the proper financing way in right time, that is, should be flexible.

Since 1990s, financial systems in main developed countries are developing towards complete function and flexibility in fact.Such overall view should be insisted on too in planning China's financial system.Financial reform, as an important content of the economic reform of our country, is in a key period.According to preceding analysis, during this period, developing various markets especially multilevel capital markets, cultivating institutional investors, carrying out financial mixed operation, following credit assets securitization in a more cost-effective manner, obviously become our main task.

Since limited by our capacity and research perspective, there are some topics related to this article have not been explored.For example, we research the financing of technology innovation in this book, and we know financing related to borrowers and lenders both parties. However, we did not come from the borrower's point of view to analyze this problem.We did not discuss the borrower's own conditions, preferences and so on.In addition, when we compare the comparative advantage of different financial systems in different stages of financing technology innovation, we have not proved it through our own empirical analysis.