["International Journal of Finance &Economics, EarlyView. ", "\nABSTRACT\nIn this paper, we test whether institutional diversity in banking systems is beneficial to economic complexity, using data for Italian provinces in the period 1998–2017. We compute different indexes that consider diversity from an ownership, institutional, business model and competition point of view and find that higher diversity has a positive role on economic complexity. Results come from system‐GMM estimation, are not influenced by the financial cycle and are robust to changes in the lag structure, dependent variables, specification and spatial dependence. They point to the beneficial role of banking diversity for innovation and growth of local ecosystems.\n"]