Summary. Arguments about structural policies in Europe, including the EU’s Lisbon strategy, put a legitimate emphasis on labour and product market reforms, but often overlook the role of the financial system in fostering innovation and growth. Corporate finance is crucial for the emergence of new companies, well beyond the much-analysed technology sector. In a knowledge economy where companies rely less on physical investment, traditional bank loans are insufficient. While Europe has a world-class financial system for established companies, new instruments tailored to the needs of emerging firms remain underdeveloped in most EU countries
