‘What is patient capital and who supplies it?’

In comparative political economy (CPE), ‘patient capital’ (‘PC’)—primarily from relational banks—is central to distinguishing national economies. The rise of ‘market-based banking’ highlights the growing inability of commercial banks to be patient. This raises the question of whether alternative forms of PC exist, but CPE lacks a framework to consider PC provision by financial markets. We develop our concept of PC and a framework for determining the investors most likely to provide it—and under which conditions. We define PC as equity or debt whose providers aim to capture benefits specific to long-term investments and who maintain their investment even in the face of adverse short-term conditions for the firm. We argue for determining patience though three questions: (a) Is the investment (loan) intended to be short or long term? (b) Is the investor engaged with management in pursuit of short-term share price performance or creditworthiness? and (c) What is the likelihood of exit because of concerns regarding short-term performance? Our framework lays the cornerstones for a new comparative theory of financial systems.