WWS Calendar

JDP Dilemmas of Inequality Lecture Series

Nov 12, 2018 05:30PM to 06:30PM
Wallace Hall
Restricted to Princeton graduate students, faculty, and fellows
Neil Fligstein, University of California

Innovation, Practical Knowledge, and the Theory of Fields: How to Make Sense of Financial Innovation


Innovation does not just involve the creation of new products, but also includes the need for new kinds of processes, and organizational change. As a result, I argue that innovation can be usefully studied at a field level because changes in new products, processes, and organizations are embedded in larger networks of organizations, including those of the government. I briefly lay out how field theory helps us conceptualize the process by which innovation emerges and spreads as a result of the adjustment, transformation, and emergence of fields. At the core of this kind of thinking is the idea that actors who are trying to do something new have to solve practical problems and much innovation is about the bricolage inherent in doing so. Studying innovation without looking at the larger context makes our studies at best incomplete and at worse, wrong. To illustrate this perspective, I consider the case of financial innovation and juxtapose field theory to financial economics and the social studies of finance. Financial economics stresses how new financial products and processes make markets more efficient while the social studies of finance views the financial economics profession as putting their theory into practice in order to perform new markets. In order to show the incompleteness of these stories, I present the case of the transition in the U.S. from a mortgage market dominated by savings and loan banks to one dominated by the capital markets. I consider how field theory helps us understand the logic of this transition and the myriad players who helped to produce a revolutionary new world. My account shows the limits of both of the existing perspectives and calls into question the pivotal role of creating more efficient capital markets or the financial economics profession in financial innovation.