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We provide a new theory of the role of banks as catalysts for industrialization. In their in-fluential analysis of continental European industrialization, Gerschenkron and Schumpeter argued that banks promoted the creation of new industries. We formalize this role of banks by introducing financial intermediaries into a “big push ” model. We show that banks may act as catalysts for industrialization provided they are sufficiently large to mobilize a critical mass of firms and that they possess sufficient market power to make profits from coordi-nation. The theory provides simple conditions that help explain why banks seem to play a creative role in some but not in other emerging markets. The model also shows that univer-sal banking helps to reduce the cost of acting as catalyst. Journal of Economic Literatur