One of the hallmarks of the recent expansion was the formation of technically related firms and the development of financial market innovations, especially venture capital markets, to support them. Technological innovation, the spread of communications, wireless and internet technologies, and the growth of new firms to exploit these capabilities offer the promise to provide new products and services as well as expanded opportunities for existing firms. This has, on the one hand, significantly affected the rate of productivity growth in the economy. At the same time the prospects for new technologies have affected securities markets, which first responded exuberantly to the potential of these technologies and then burst. The advances in technology and the market's response to them have complicated the formulation of monetary policy as the Federal Reserve has attempted to determine how much these developments have permanently altered the economy's potential growth path and how the newly generated wealth has affected spending and consumption. These issues are especially important given the recent path of economic activity and uncertainty about the current productivity path.
This conference seeks to understand the innovation process and the financial mechanisms that make it possible. At its heart is the venture capital industry, which has its historical roots in the process of technology. We will explore these links and what may be done to harness their positive influences and investigate whether there is a role for public policy in the process.