Financial and corporate governance systems and technological change: the incompleteness of fit the UK and Italy (di Andrew Tylecote, Francesca Visintin) - ABSTRACT: Our argument revolves around a simple link: technological (and therefore economic) performance of firms and countries is a function of the fit between their financial and corporate governance system (FCGS) and the technological regime of the sectors in which they are operating. We offer typologies of FCGS and technological regimes. Countries tend to specialise in the sectors for which their fit is relatively good. Taking a country’s FCGS as given, its performance will tend to improve, if the sectors to which it is relatively well-fitted become more important in the world economy, and/or if in general technological regimes move towards a better fit with its FCGS. We argue that this has been the case for the United States over the last twenty years. Such a move, to the advantage to the US, helps to account for recent changes in other countries’ FCGS in the US direction. We argue however that the change in technological regimes is more cyclical than secular; even now the US type of FCGS is poorly fitted to the technological regimes of most medium-technology industries. It is more important to seek a complete fit between one’s financial and corporate governance system and the key sectors in which a country is specialised, than to try to imitate the current international style-setter. For both the UK and Italy we examine the completeness of fit of the FCGS to the industries in which the country is specialised - for the UK, some high technology industries, and for Italy, some medium-technology industries. Both countries show a very incomplete fit. We discuss what might be done to improve it.