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Open innovation in financial services: What are the external drivers
Abstract
Over the last decades, the financial services sector has been affected
by drastic changes, resulting from multiple sources: (de-, re-) regulation;
dominant role of information and communication technologies; shift to off
balance sheet activities; service bundling; and changes in customer preferences.
This has challenged financial institutions and induced stronger needs for
innovation. However, empirical evidence on the actual drivers of innovation in
this sector is scarce. Even less is known on the factors of open innovation. This
research addresses this gap by empirically exploring drivers of innovation in
financial services. Drawing upon four datasets, we found that several forms of
innovation in financial services are relatively strongly and positively correlated
with the following indicators: number of mobile cellular subscriptions,
domestic market size index, and bank concentration. Meanwhile, there is a
negative correlation between the rate of product developed mainly by other
enterprises and quality of management schools in a given country.
... For example, the optimal degree of openness To answer this question, we engage in an exploratory field study with a large European banking company that is introducing an open IT platform to spark value co-creation. The banking context is particularly interesting when analyzing the transition towards a value co-creation strategy: First, digitization creates pressure on established banks to offer innovative digital services to their customers (Mention et al. 2014). Start-ups from the IT domain referred to as "fintechs" have come up with innovative solutions that target the core of the banking business, putting pressure on established banks to find appropriate responses. ...
... Third, the European banking sector is affected by changes in regulation as for example triggered by the financial crisis in 2008. These changes need to be accommodated by the IT systems, which consumes valuable resources no longer available for innovative projects (Mention et al. 2014). ...
... In practice, our work firstly provides insights for banking companies that face specific challenges due to digitization, changes in customer preferences, and regulation (Mention et al. 2014). By showing potential benefits and areas of conflict deducted from a real case, we provide dimensions that need to be considered before engaging in open innovation activities with third parties. ...
... To answer this question, we engage in an exploratory field study with a large European banking company that is introducing an open IT platform to spark value co-creation. The banking context is particularly interesting when analysing the transition towards a value co-creation strategy: First, digitization creates pressure on established banks to offer innovative digital services to their customers (Mention, Martovoy, & Torkkeli, 2014). Start-ups from the IT domain referred to as "fintechs" have come up with innovative solutions that target the core of the banking business, putting pressure on established banks to find appropriate responses. ...
... Third, the European banking sector is affected by changes in regulation as for example triggered by the financial crisis in 2008. These changes need to be accommodated by the IT systems, which consumes valuable resources no longer available for innovative projects (Mention et al., 2014). ...
... We conducted semi-structured interviews with employees and externals involved in the open API project in different positions following the guidelines by Gläser and Laudel (2009). To embrace depth and richness of the data, we conducted the interviews inspired by grounded theory methodology (Glaser & Strauss, 1998;Mason, 2006;Urquhart, 2013). That is, we iteratively revised our interview guidelines based on the insights of interviews that we had already conducted. ...
Inspired by the success of digital-native companies such as Google or Salesforce, established companies such as car manufacturers, equipment manufacturers, or banks strive for value co-creation via open IT platforms. However, literature on value co-creation does not cater to the specific situation of established companies. Addressing this gap, we seek to improve our understanding of how established companies can co-create value through openness and collaboration with IT platforms. Based on an exploratory field study of a European bank that is introducing an IT platform, we show that openness and collaboration enable value co-creation while creating areas of conflict and potential benefit. For example, openness creates internal resistance and exposes technology while facilitating internal transparency and standardization. Collaboration entails conflicts with existing partners that are affected by the value co-creation strategy, but existing partners are also assets in incentivizing collaboration with third-party developers. Contributing to literature on value co-creation and openness of IT, we confirm that established companies can benefit from IT platforms but need to address specific areas of conflict and potential benefits related to balancing openness and control and governing collaboration. Our discussion provides first insights for established companies that consider implementing an IT platform strategy.
... We consider the context of platforms in this B2B segment of the financial industry as a revelatory space (a concept suggested by Yin (2014)), suitable for studying the dynamics of complex ecosystem structures (Breidbach et al., 2020) and the disruptive nature of AI-driven innovation (Payne et al., 2021a). Technological pressures compel established asset managers and distributors to deliver and co-develop innovative digital services (Mention et al., 2014;Lee and Shin, 2018). Traditional asset management firms, historically reliant on closed IT systems and strategic partnerships for security (Haberly et al., 2019), are now adopting a more open approach through emerging service platforms, creating new business opportunities (Tian et al., 2021). ...
Increasingly, digital platforms connect suppliers, customers, and other ecosystem parties, facilitating the introduction of various Platform-as-a-Service (PaaS) offerings. This study examines the co-evolution of actor engagement (AE), reflecting actors’ dispositions to invest resources in interactions, and value co-creation (VCC), demonstrated through reciprocal resource integration. The focus is on PaaS initiatives in the asset management industry. Using a comparative case study approach, we analyze two fintech-generated PaaS offerings: a freemium model and a subscription-based model. Our findings reveal distinct pathways for platform development and scaling, driven by the interplay between AE and VCC. The freemium model fosters a “viral” community-building path, where early VCC serves as the engine for AE-VCC co-evolution. Conversely, the subscription model follows a “controlled” ecosystem-building path, with AE driving the process. We observe a gradual involvement of additional ecosystem partners, leading to upgraded solutions, expanded PaaS offerings, and platform upscaling. We identify key factors influencing these dynamics, including business model characteristics, actor roles, and feedback loops. Our study contributes to the literature on digital servitization and platform ecosystems by highlighting the importance of integrating AE and VCC practices to enhance platform utilization and scalability. We propose a framework and research propositions to guide future studies on PaaS development in complex, institutionalized industries. These insights also provide implications for managers aiming to implement effective PaaS strategies and foster innovation in the financial services sector.
... Martovoy et al. (2015) and Vermeulen (2004) studied the pros and cons of OI in financial service development and management. In an empirical study, Salampasis et al. (2014) identified the external drivers for OI in the financial service sector and the role of trust (Salampasis et al., 2015;Mention et al., 2014). At the same time, practitioners within the financial sector across the globe have been applying OI-based methods to meet the changing financial service innovation trends. ...
... The CEO's statement above crystallizes the problem firms must overcome, regardless of sector (including financial), to benefit from open innovation (OI): employee resistance and customer preferences and intense change in information and communication technology (Mention et al., 2014). To respond to these new challenges, banks must participate in disruptive change by increasing innovation (Kiziloglu, 2015). ...
Purpose
This paper aims to investigate whether and under what conditions open innovation (OI) drives innovation performance (IP) in the financial sector. To this end, the paper first analyzes in-depth the indirect effect of overcoming two attitudinal mediators, namely, not-invented-here syndrome (NIHS) and not-sold-here syndrome (NSHS). It then uses dynamic capabilities theory to hypothesize that the indirect effects are moderated by absorptive and desorptive capabilities, respectively.
Design/methodology/approach
The authors perform an empirical study of major Spanish financial entities. Data are collected from 288 questionnaires from employees at branches of 13 bank entities. Regression analysis tests the mediating role of overcoming syndromes and the moderated-mediating role of dynamic capabilities in the OI–IP relationship.
Findings
Results confirm the indirect effect of overcoming NIHS on the relationship between outside-in OI and IP, and the indirect effect of overcoming NSHS on the relationship between inside-out OI and IP. Further, absorptive capacity moderates the indirect effect between outside-in OI practices and IP by overcoming NIHS, and desorptive capacity moderates the indirect effect between inside-out OI practices and IP by overcoming NSHS.
Originality/value
This paper advances knowledge by explaining discrepancies in the sign of the OI–IP relationship. By introducing comprehensive absorptive and desorptive capacity models to explain OI, it advocates an integrative framework to understand OI activities and their outcomes. Managers should develop these capacities using human talent training and cultural values development to mitigate NIHS and NSHS and optimize firms’ OI efforts and the improved IP benefits derived from them.
... Usually there are a few factors use for the evaluation and ranking are traffic rankings, Inbound links (linked sites), competition, page views, speed, and searching through a web search engine (Wang, 2009). The advantages of equitableness, suppleness, accuracy, gumption, and manoeuvre ability are mainly provided by these factors and it can be well used not only for the assessment of different websites but also for the assessment of one website at different period (Merwe and Bekker, 2003;Mention et al., 2014). To find the actual position of the ISMs these five factors assessment methods are the best way and it will also take the development direction of ISM website construction (Zhang et al., 2007;Dash and Kumar, 2014;Railiene, 2015). ...
Consumers are switching from offline to online to buy everything due to this reason nowadays internet shopping malls (ISMs) are setting up a very crucial role in the economy. For assessment and ranking are basically a critical work which could be exploitation of internet shopping malls information resources when consider in a scientific way, there are many methods for the evaluation and ranking of e-commerce sites. Taking into consideration traffic rank, inbound links, competition, speed, and keyword statistics, in literature multi criteria decision making (MCDM) methods are rarely used by the researchers to find the rank of internet shopping malls (ISMs) on the basis of primary/secondary data of these influencing factors. This study, therefore, is unique to narrow down the gap in literature by employing MCDM methods i.e. Entropy and analytic hierarchy process (AHP) to collect the weight of influencing factors and technique for order preference by similarity to ideal (TOPSIS) to find the rank of internet shopping malls (ISMs). After finding out the rank of selected criteria, solution optimality needs to be done to find the average ideal solution matrix. Conclusion and managerial implications of the study are also discussed.
... Usually there are a few factors use for the evaluation and ranking are traffic rankings, Inbound links (linked sites), competition, page views, speed, and searching through a web search engine (Wang, 2009). The advantages of equitableness, suppleness, accuracy, gumption, and manoeuvre ability are mainly provided by these factors and it can be well used not only for the assessment of different websites but also for the assessment of one website at different period (Merwe and Bekker, 2003;Mention et al., 2014). To find the actual position of the ISMs these five factors assessment methods are the best way and it will also take the development direction of ISM website construction ( Zhang et al., 2007;Dash and Kumar, 2014;Railiene, 2015). ...
Consumers are switching from offline to online to buy everything due to this reason nowadays Internet shopping malls (ISMs) are setting up a very crucial role in the economy. For assessment and ranking are basically a critical work which could be exploitation of Internet shopping malls information resources when consider in a scientific way, there are many methods for the evaluation and ranking of e-commerce sites. Taking into consideration Traffic Rank, Inbound Links, Competition, Speed, and Keyword Statistics, in literature Multi Criteria Decision Making (MCDM) methods are rarely used by the researchers to find the rank of Internet Shopping Malls (ISMs) on the basis of primary/secondary data of these influencing factors. This study, therefore, is unique to narrow down the gap in literature by employing MCDM methods i.e. Entropy and Analytic Hierarchy Process (AHP) to collect the weight of influencing factors and Technique for Order Preference by Similarity to Ideal (TOPSIS) to find the rank of Internet Shopping Malls (ISMs). After finding out the rank of selected criteria, solution optimality needs to be done to find the average ideal solution matrix. Conclusion and managerial implications of the study are also discussed.
... Schumpeter (1942) coined the term 'creative destruction' to explain economic growth. Since then, the study of innovations has evolved into more than 50 types of innovation (Varadarajan, 2010) including the term open innovation (Mention et al., 2014). Furthermore, the innovation process lies at the core of newly created product; hence, the facilitation of levers is critical in developing products that really service consumers (Walchay et al., 2011). ...
This paper aims to determine consumers' internal preference structure for branded and refillable printing cartridges under the perspective of theory of disruptive innovations. In the study region, users may choose to buy a new branded printing cartridge or, once purchased, refill it or have it refilled for further use, displacing the purchase of a new branded cartridge. Drawing on choice-based conjoint techniques and on the basis of 84 sample observations, we assessed the relative importance of price, lifespan, reliability, and quality as critical factors for choosing between branded and refillable printing cartridges. Results of the study show that consumers in market segments, low and high value reliability and quality as main drivers but price is valued higher by high-end consumers and branded printing cartridges' users. Lifespan of the product was found to have a very low contribution to utility. Results are discussed from the perspective of new product development.
... Schumpeter (1942) coined the term 'creative destruction' to explain economic growth. Since then, the study of innovations has evolved into more than 50 types of innovation (Varadarajan, 2010) including the term open innovation (Mention et al., 2014). Furthermore, the innovation process lies at the core of newly created product; hence, the facilitation of levers is critical in developing products that really service consumers (Walchay et al., 2011). ...
This paper aims to determine consumers' internal preference structure for branded and refillable printing cartridges under the perspective of theory of disruptive innovations. In the study region, users may choose to buy a new branded printing cartridge or, once purchased, refill it or have it refilled for further use, displacing the purchase of a new branded cartridge. Drawing on choice-based conjoint techniques and on the basis of 84 sample observations, we assessed the relative importance of price, lifespan, reliability, and quality as critical factors for choosing between branded and refillable printing cartridges. Results of the study show that consumers in market segments, low and high value reliability and quality as main drivers but price is valued higher by high-end consumers and branded printing cartridges' users. Lifespan of the product was found to have a very low contribution to utility. Results are discussed from the perspective of new product development.
The growth in financial technologies (Fintech) skyrocketed after 2008 and there are many reasons
behind this happening. New entrants in financial services sector such as large cutting-edge
technology companies and technology startups offer new innovations and technologies. They shape
whole sector in terms of regulations which are made by authorities, customer habits and strategies.
While new entrants are attracting customers with their new technologies and services, incumbents
are being forced to collaborate with them and trying to adopt the new environment and protect their
interests.
There are five purposes of this research. It aims to understand the triggers behind Fintech
development. Then, it researches the role of Open Innovation methods in the field. It reveals
advantages and disadvantages of incumbents and Fintechs. Then it examines the opportunities and
threats in Fintech space. Finally it exposes the risks and the challenges in the field.
The study reflects the effect of economic crises in 2008, the developments in technology after 2008,
changing business models of technology vendors and changes in the demographics as triggers
behind Fintech development. It reveals that collaboration is a must and it offers myriad opportunities
for the parties. It shows the importance of Open Innovation methods including acquisition of assets,
partnerships, alliances and accelerators in the Fintech space. It highlights the importance of adopting
new environment and investing technology. It exposes that while capital and customer base are the
main advantages of incumbents, cutting-edge technologies and flexibility are main advantages of
Fintechs. It emphasizes the importance of “Banking as a Service” notion with respect to new
regulations. In addition, it reflects that political and regulatory ambiguities, overvaluation of
Fintechs and hurdles in acquisitions are the main challenges in the market.
Co-creation can be useful to develop financial services relevant to customer needs. However, role of customers in financial innovation seems to be controversial. In this qualitative study we focus on: the characteristics of users who can qualify for co-creation, the process of co-creation, and profit-seeking customers. Our findings suggest that financial institutions tend to select customers who are more demanding and who have a possibility to cooperate (in retail markets), and those customers with whom they have longstanding and intertwined relationships (in corporate markets). Financial innovators differ in a way they cooperate with users. We proposed the typology of innovation and introduced the notion of co-profiting proved in the case of co-creation commercialised jointly; however, we did not find evidence of user-centred innovation commercialised by producer as well as user's innovation commercialised jointly.
Recently, literature on innovation in service activities has increased significantly. Much effort has been concentrated on understanding the importance of innovation for these activities, and on stressing innovative differences relative to the manufacturing innovation model. However, a deeper understanding is needed in three main areas: the degree of innovation heterogeneity among different service activities, the factors that explain this heterogeneity, and the primary drivers of the innovation process for each activity. Using results from the Third Community Innovation Survey, this paper aims to identify the extent to which there are similarities and differences in the main innovation attributes in four important service sub-sectors. After describing the characteristics of innovation and the behavior of variables in the sub-sectors, a typology of innovation patterns is identified.
Economic theory perceives innovation as a source of national competitiveness, and the literature dealing with innovation has flourished. In this paper we assess the determinants of innovation activities in Croatian enterprises and their implications for innovation policy. A Type-2 Tobit model is used for modelling the innovation behaviour of Croatian companies. Firm-level data are available from the results of the Croatian Community Innovation Survey (CIS) conducted for the period 2001-2003. The results of the econometric model provide implications for key aspects of a more effective innovation policy. The model results suggest insignificance of R&D activity and demand pull variable significance at 85%. Therefore, innovation policy needs to pay much more attention to the innovation diffusion processes, as a key mechanism that may facilitate advancements in innovation activities.
This paper aims at exploring the role of trust within the financial services sector in relation to open and collaborative financial innovation. Financial services nowadays represent considerable share of the global economy. In the European Union (EU-27), financial services accounted for 5.9% of the gross value added in 2010 (Eurostat, 2011). There is a vast discussion about open innovation and the need for collaboration and knowledge sharing; however, in the process of building up this open and collaborative framework, trust does not yet seem to have a place in the academic debate. Relying on a review covering multiple literature streams and primary data collected from interviews, the relevant antecedents of trust in the financial services sector under this open and collaborative perspective, ex-post financial crisis are identified.
What factors lead to success in the development of new businesses
services? By synthesising the literature on new goods development and
services marketing, the results of a major empirical investigation of
new service development in the business-to-business services sector are
reported. A set of factors that describe new service projects is
identified and which factors are responsible for accomplishing different
forms of success are shown. Further, the findings speak to managers
about how the features that distinguish services from physical goods
impact on the successful development of new services. Developing new
services that provide clients improved functional and experiential
quality, that are innovative and truly superior to competitive
offerings, and that benefit from a proficient new service development
process, as well as from the unique strengths of the firm are key
requirements for creating and marketing winning new services.
Financial innovation has been both praised as the engine of growth of society and castigated for being the source of the weakness of the economy. In this article, we review the literature on financial innovation and highlight the similarities and differences between financial innovation and other forms of innovation. We also propose a research agenda to systematically address the social welfare implications of financial innovation. To complement existing empirical and theoretical methods, we propose that scholars examine case studies of systemic (widely adopted) innovations, explicitly considering counterfactual histories had the innovations never been invented or adopted.
Sustained competitive advantage depends heavily on the ability of organisations to internalise the benefits of innovative activities. While the vital importance of innovation in today's competitive climate has been widely proclaimed, our understanding of innovative behaviour in service organisations is not yet fully developed. This article documents an interpretative approach (based on archival research and semi-structured interviews) of the main drivers of change in organisational function (process) and access to financial markets (service or product) within UK commercial banking. Research in this article contributes to the understanding of innovation in service organisations. The research explores past and present perceptions of banks' senior managers and management consultants on the factors stimulating and constraining the adoption of new technology in financial intermediaries.
In the rapidly changing global business environment multinational organisations experience the principal design challenge in managing differentiation in work culture and organisational structure towards achieving predetermined goals. Organisational design is a process involving development of control measures that help in coordinating organisational tasks and motivate the people to improve their performance. This paper discusses managing the values and organisational change in financial institutions during economic recession and driving sustainable growth. The discussion demonstrates a sustainable paradigm for managing performance and sustainable growth of financial institutions by converging traditional design activities, work culture, and monitoring and evaluation measures. Practitioners can benefit from the discussion presented in the study to clarify, improve and enrich new approaches of organisational designing during economic crisis.
Understanding sources of sustained competitive advantage has become a major area of research in strategic management. Building on the assumptions that strategic resources are heterogeneously distributed across firms and that these differences are stable over time, this article examines the link between firm resources and sustained competitive advantage. Four empirical indicators of the potential of firm resources to generate sustained competitive advantage-value, rareness, imitability, and substitutability are discussed. The model is applied by analyzing the potential of several firm resources for generating sustained competitive advantages. The article concludes by examining implications of this firm resource model of sustained competitive advantage for other business disciplines.
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In the recent past, all the industries have undergone a sea change with the advent and adoption of 3rd arm of technology, i.e., information and communication technologies (ICTs). Particularly in the case of banking industry, the personal banking has become dearer to the customers with the advent and usage of ICTs. Banking has moved from 'banking-in-person' to 'net-banking' to 'mobile banking' and over to 'virtual banking'. In this present scenario, spending of increasing amounts of capital on by several banks is on upward paths. This aspect along with the benefits derived by the banks with the usage of ICTs has made ways to understand the relationship between investments in ICT and select dimensions of productivity of banks. This study attempts to look into the relationship between investment in ICT systems and the over all usage of ICTs and resulting levels of select dimensions of productivity. For this research, the impact of commitment from the Apex management is also studied. The experimental/observational domain of the study is limited to banks where in ICT infrastructure for select dimensions of usage.
The present paper employs the Malmquist Productivity Index (MPI) method to examine the sources of total factor productivity change of the Philippines banking sector during the period of 1998 to 2008. The empirical findings suggest that the Philippines banking sector has exhibited productivity regress due to technological regress. The results indicate that both the domestic and foreign banks have exhibited productivity regress due to technological regress rather than efficiency decline. We find that the more diversified Philippines banks tend to be less productive in their intermediation function. On the other hand, the relatively more productive Philippines banks are also the ones which are relatively more profitable. The results seem to suggest that the different structures of bank ownership have no significant impact on bank productivity.
This paper attempts to analyse the productivity and efficiency growth pattern of Indian banking industry during the post-liberalisation era. Malmquist data envelopment analysis (DEA) has been used to estimate the different performance measures viz., productivity growth, technological change, technical efficiency and scale efficiency for the period 1996-2006. Results indicate that during the study period, this industry experienced regress in technological progress along with stagnation in technical efficiency. Some progress is reported in scale economies but the dominating technological regress resulted in productivity decline. From the group wise analysis, nationalised sector came out to be the leader in case of scale economies whereas private sector emerged as the best performer in technical efficiency. None of the groups could experience positive productivity growth over the study period.
This article discusses characteristic features and problems of product development processes in the financial services sector and relates these to the models and concepts of the modern new product development literature. It is based on a series of semi-structured interviews with product managers and IT personnel in 14 banks and 25 insurance companies (mostly in the area of life insurance). The interviews showed that most companies have adopted the concept of multi-disciplinary project teams to develop new products. However, the creation of such teams has seldom resulted in good communications between the various functional specialists involved. Frequently, problems of communication and collaboration arise between IT-specialists and marketing specialists and between actuaries and the other project team members. The development stages presented in the general literature on new product development can to some extent be discerned in the financial services sector as well. Quite frequently some of these stages are conducted in parallel in the sector. Notable is the dominant role played by marketing. However, the frequently proclaimed increased consumer orientation appears somewhat ambiguous, as very few companies involve final consumers in the innovation process.
In the early 1990s, India and Pakistan introduced a series of financial liberalisation initiatives aimed at increasing the productivity of their financial services sector. Against a background of unprecedented change, which these initiatives heralded, the paper applies a DEA-type Malmquist total factor productivity change index to examine productivity growth, efficiency change, and technical progress in the commercial banking industries of India and Pakistan during 1992–98. Following Leightner and Lovell [1998]19.
Leightner , J. E. and
Lovell , C. A.K. 1998. The impact of financial liberalisation on the performance of Thai banks. Journal of Economics and Business, 50: 115–31. [CrossRef]View all references, a Malmquist index is constructed for two different bank service specifications. The first is derived from the corporate objectives of the commercial banks, and the second from the policy objectives of the Indian and Pakistani governments. The analysis reveals that in both countries the improvement in total factor productivity was highest when the government's policy objective was used. In addition, the public sector banks showed very little improvement in total factor productivity due to their inability to adopt new technology and because of the presence of high non-performing loans. In contrast, foreign banks witnessed the highest improvement in total factor productivity due to an improvement in their efficiency and technological innovation.
This paper elucidates the underlying economics of the resource-based view of competitive advantage and integrates existing perspectives into a parsimonious model of resources and firm performance. The essence of this model is that four conditions underlie sustained competitive advantage, all of which must be met. These include superior resources (heterogeneity within an industry), ex post limits to competition, imperfect resource mobility, and ex ante limits to competition. In the concluding section, applications of the model for both single business strategy and corporate strategy are discussed.
Explores the impact of a number of aspects of the new product
development project on the success of new financial services in the
United Kingdom. Finds that synergy between the new product and the
organization, and the quality of internal marketing, are particularly
associated with eventual success for the new product. Technological
advantage, market research and responsiveness (i.e. speed of
development) are also associated with success. Banks seem to be
particularly effective in their use of market research, whereas building
societies are good at internal marketing and synergy. New interest
accounts have been particularly successful because of the use of market
research and the speed of their development.
Contributes to the growing body of information on the determinants of performance in new products. Examines a sample of “typical” new products (instead of the more usual comparison of successes and failures) and identifies the factors that are crucial for producing outstanding performance in the financial services sector. Shows that marketing factors (i.e. effective distribution and effective communications) are the keys to new service success. In addition demonstrates the importance of the quality of the service offered and the quality of the tangible evidence of the service as a basis of outstanding performance. These key determinants of performance need to be built on the skills of the frontline staff and the push they give to the new product. Reiterates the importance of synergy when developing new products. Product advantage is not the key success factor, contrary to previous findings in other sectors. Attributes this to the nature of the sector studied (financial services) where sustainable competitive product advantage is rarely achieved. Makes a comparison between success factors for consumer services and industrial products/services.
How companies orchestrate the activities surrounding the
development and launch of a new product or service has been shown to
have a critical impact on new service performance. Most service
companies, including those in the industrial financial sector, have
little in the way of a highly developed new service programme. Reports
the results of a major empirical investigation of 106 new industrial
financial services where the factors which define the new service
development process were the primary focus of study. The findings
indicate that six basic factors, comprising the technical activities
required for design and launch and the type of corporate environments
that nurture success, define the service development function for new
industrial financial services. Four factors, including the quality of
execution of the up-front activities and of the launch programme, an
expert-driven process and, in particular, a supportive and
high-involvement corporate culture, were shown to have a critical impact
on new service success.
The last decade has been notable for increasing levels of environmental turbulence brouth about by technological advances, deregulation, consumer sophistication, and competition. Consequently a premium has been placed on the ability of managers to differentiate their products and maintain competitive advantages. This may be achieved by developing an organizational climate that is responsive to change and supportive of new product initiatives. In his article, Des Thwaites draws on the established literature and a panel of informed opinion from the financial services sector to identify 12 characteristics of an organization that influence the effectiveness of the new product development process. United Kingdom building societies are examined to determine the emphasis given to these critical aspects of innovation. Three underlying factors, communication, people and mission, explain much of the variance among building societies. Five discrete groupings of firms are identified, and significant differences between their orientations are determined across a range of variables supporting new product development. While the empirical section of the study relates to a specific industrial sector, several issues and the recommendations transcend industry boundaries.
It is self-evident that financial innovation is a key player in the contemporary economy. However, its significant importance has largely been overlooked in innovation studies. To fill up this gap, and through an interdisciplinary approach, this article details a research agenda for innovation in financial services. It reviews the 'what', 'why' and 'how' of financial innovation in order to clarify all the ambiguities surrounding its nature, creation, purpose and impact. Specifically, the article investigates its definition and distinguishing features, its key determinants, its supporting processes, and finally its effects, mainly at firm-level. Therefore, the article opens the black box of financial innovation and uncovers its peculiarities in order to understand how it occurs when innovation is considered both as an 'outcome' of financial innovation and a 'process' supporting its creation.
New product development is an important aspect of service marketing. Information, however, is sparse on the actual development processes that are used by service firms to develop these new products. Utilizing a case study approach this article traces the development of a new service for a major UK based financial institution. Through an in‐depth examination of the processes it was found that a complex development system was used. The authors were able to identify a number of factors that were essential to the successful development of this new product.
This study employs a recent national survey of over 1100 British financial firms to ascertain the determinants of financial innovation and their sales success using Logit and generalised Tobit models. We find the likelihood of financial innovation rises with the size of financial firms, employee education, greater expenditure on research and development, the availability of finance, and the extent to which firms cooperate with each other. R&D, cooperation, and appropriability are the main variables driving the success of financial innovation, measured by the percentage share of innovations sold. Firms in London/the south have a significantly greater tendency to innovate, though Scotland also does well. Stock broking, fund management and related activities are more innovative than firms in the financial intermediation and pension/insurance sectors.
The article reflects on the diffusion of the ‘resource-based view of the firm’ into academic and practitioner thought. The contributions of many people are noted. In closing, I offer some speculations about the future use of these ideas.
This paper examines the propensity of organizations to adopt technological innovations. Technological innovations evolve from the stock of skills which organizations have accumulated over time. Linkages with extramural sources of technology are presumed to be important as well. Hypotheses are tested on a sample of commercial banks. Findings show that prior experience in information technology, in tandem with a variety of interfirm linkages, will affect the banks' decision to adopt this innovation.
Many services can be self-provided. An individual user or a user firm can, for example, choose to do its own accounting - choose to self-provide that service - instead of hiring an accounting firm to provide it. Since users can 'serve themselves' in many cases, it is reasonable to suspect that they can also innovate with respect to the services they self-provide - possibly without the assistance of service providers. In this paper, we conduct the first quantitative exploration of the importance of services innovation by users, focusing on the field of commercial and retail banking services. We find that 55% of today's computerized commercial banking services were first developed and implemented by non-bank firms for their own use, and 44% of today's computerized retail banking services were first developed and implemented by individual service users rather than by commercial financial service providers. Manual precursors to these services - manual procedures that carried out functions similar to computerized services in our sample - were almost always developed by users as self-services. Our empirical findings differ significantly from prevalent producer-centered views of service development. We speculate that the patterns we have observed in banking with respect to the major role of users in service development will prove to be quite general. If so, this will be an important matter: on the order of 75% of GDP in advanced economies today is derived from services. We discuss the implications of our findings for research and practice in service development.
The word revolution is entirely appropriate for describing the changes in financial institutions and instruments that have occurred in the past twenty years. The major impulses to successful financial innovations have come from regulations and taxes. The outlook for the future is for a slowing down of the rate of financial innovation, but much growth and improvement are still in prospect.
This study aims to identify the influence of co-operation practices and the use of internal and external information sources on the propensity of firms to introduce new to the market innovations in the service sector. Data come from the 4th Community Innovation Survey, which covers the years 2002-2004. A logistic regression model is applied with the degree of novelty of good/service innovation as dependent variable. The analysis of the parameter estimates shows that firms provided with information from market sources and from internal sources as well as firms involved in science-based collaboration for their product innovations are more likely to introduce new to the market innovations, whereas information coming from competitors seems to have a negative influence on the degree of novelty of innovation.
Against a background of far-reaching structural change in the banking sector, this article reviews the recent academic literature on developments in European banking. European banking markets have become increasingly integrated in recent years, but barriers to full integration, especially in retail banking, still remain. European integration has possible implications for systemic risk, and poses various challenges for the current supervisory framework. The banks’ responses to the changing competitive environment include the pursuit of strategies of diversification, vertical product differentiation and consolidation. European integration has implications for competition in banking markets, for the nature of long-term borrower-lender relationships, and for the relationships between ownership structure, technological change and bank efficiency. The article concludes by reviewing recent literature on the credit channel in the monetary transmission mechanism, and interest rate pass-through.
Developing new products is of the highest importance for organizations. The financial sector has also recognized the increasing importance of new products. However, research on the management of innovation has mainly been conducted in manufacturing industries. Based on an empirical study in the financial services sector this paper first describes how financial companies organize their innovative processes and what barriers to innovation can be identified in banks and insurance companies. Next, the two main reasons for the persistence of these barriers are outlined. The paper ends with some conclusions.
Although industrial services comprise an increasingly important sector of the economy, research has largely ignored product innovation in services, resulting in speculation about the keys to new service product success. A popular view is that because services differ from physical products, the factors that determine success are therefore also unique. Our research, which focused on 106 new industrial financial services, showed that new service success depends largely on five key factors which in many respects are similar to those for physical products.
The critical role of innovation has long been recognized in physical goods; however, the development of innovative services has received much less attention. The research described here reports on an early major study of success and failure in new industrial services. Building on her integration of two literatures on new product innovation and services marketing, Ulrike de Brentani reports how companies measure new service performance and the factors which are associated with success. She reports that new industrial services share some important success factors with physical goods, such as the firm's market orientation, a formal service development process, project synergy and a truly superior new service offering. Yet she finds that firms must adjust their approach to the distinctive character of services, including customer perceptions of service quality, features that successfully differentiate services in competitive terms and cost reduction.
The European financial services sector is confronted with major forces that have changed its competitive dynamics and the strategic context. Firstly, we investigate the pace of the diffusion of two forces for strategic renewal (technological innovations and regulatory changes); secondly, we assess similarities in the pace of diffusion across countries; and thirdly, we assess the impact of these developments on the European financial landscape, focusing on five EU countries from 1990 to 1999. Preliminary findings suggest that country-specific patterns of diffusion have decreased substantially, indicating the emergence of industry-generic patterns of diffusion, while the speed of diffusion is increasing within the sector. This will give rise to a hyper-competitive landscape in the beginning of this century. Understanding the emergence of such landscapes creates important managerial challenges for the strategic renewal journeys of both incumbent firms and new entrants, in the financial services sector and in sectors confronted with similar developments.
This study examines the competitive conditions in the banking industries of eleven Latin American countries for the period 1993–2000. For these countries, the time interval under examination corresponds to an era characterized by substantial reforms to restructure their banking systems, increased consolidation and foreign bank penetration. The banks in our sample are found to be earning their revenues as if operating under monopolistic competition, as in many other developed and emerging financial systems. The results indicate that, overall, market concentration is not significantly related with competitive conduct. At the country level, however, we do observe a decline in competition for Brazil, Chile, and Venezuela in late 1990s which may be attributable to increased consolidation. Further, we observe that deregulation and opening up of the financial markets for foreign participation serves as an important catalyst to increase the competitiveness of banking markets. Higher degree of competition in the sector, in return, is associated with reduced bank margins and profitability but improved cost efficiency.
This paper compares parametric and non-parametric estimates of productivity change in European banking between 1994 and 2000. Productivity change has also been further decomposed into technological change, or change in best practice, and efficiency change. Both the parametric and non-parametric approaches consistently identify those systems that have benefited most (and least) from productivity change during the 1990s. The results also suggest that (where found) productivity growth has mainly been brought about by improvements in technological change and there does not appear to have been `catch-up' by non-best-practice institutions. Competing methodologies sometimes identify conflicting findings for the sources of productivity for individual years. However, the two approaches generally do not yield markedly different results in terms of identifying the components of productivity growth in European banking during the 1990s.
Australian and New Zealand environmental economists have played a significant role in the development of concepts and their application across three fields within their subdiscipline: non-market valuation, institutional economics and bioeconomic modelling. These contributions have been spurred on by debates within and outside the discipline. Much of the controversy has centred on the validity of valuations generated through the application of stated preference methods such as contingent valuation. Suggestions to overcome some shortcomings in the work of environmental economists include the commissioning of a sequence of non-market valuation studies to fill existing gaps to improve the potential for benefit transfer. Copyright 2005 Australian Agricultural and Resource Economics Society Inc. and Blackwell Publishing Asia Pty Ltd..
Very little is known about how adopting Internet activities impact traditional banks. By tracing the experience of Italian
commercial banks, we provide evidence and implications for banks’ use of new Internet technology and innovative banking products
as they relate to performance. Using different definitions for what is considered as Internet activity and by examining alternative
proxies for bank return and risk, we find a significant link between offerings of Internet banking products and bank performance.
Although this link is significantly positive for bank returns, we find a negative, marginally significant, association between
the adoption of Internet activities and bank risk.
This paper presents a longitudinal study on the evolution of the retail banking sector in the UK following the adoption of automated payments in the 1970s. The analysis is cast in the context of innovation studies and articulates how changing configurations of the knowledge base combined with the emergence and adaptation of institutional structures stirred a paradigm of service innovation in an information-intensive industry like banking. The cases of the Automated Teller Machine (ATM) and of the Electronic Fund Transfer at Point of Sale (EFTPOS) provide evidence on the subtleties of a dual evolutionary process underpinning the development of a system of innovation: the growing ecology of actors and the emergence of new forms of coordination across them.
This paper examines the litigation of patents relating to financial products and services. I show that these grants are being litigated at a rate 27 to 39 times greater than that of patents as a whole. The patents being litigated are disproportionately those issued to individuals and to smaller, private entities, as well as those whose features may proxy for higher quality. Larger entities are disproportionately targeted in litigation. I discuss how the findings are in large part consistent with the theoretical literature on the economics of litigation.
This paper models the diffusion pattern of financial innovations. Our model distinguishes between two factors, internal and external influence, that determine banks' decision to adopt an innovation. Internal influence refers to competitive, strategic, and informational factors that are related to the number of banks that have adopted the innovation earlier and external influence captures the effect of exogenous factors on banks' assessment of the innovation's desirability. While the latter has been analyzed extensively in the literature, little attention has been paid to how the adoption of an innovation by one bank makes it more or less desirable for other banks to adopt the innovation (internal influence). We use mathematical diffusion models to examine the diffusion structure of two financial innovations; junk bonds and note issuance facilities (NIFs). We find evidence for positive internal influence at both first-time and repeat adoption levels by banks. Internal adoption dominated the diffusion pattern of NIFs but not for junk bonds. The results of this paper shows that innovations diffuse among banks in a more dynamic environment than is usually assumed in the literature.
New financial product designs, improved computer and telecommunications technology, and advances in the theory of finance have led to dramatic and rapid changes in the structure of global financial markets and institutions. This paper offers a functional perspective as the conceptual framework for analyzing the dynamics of institutional changes in financial intermediation and uses a series of examples to illustrate the range of institutional change that is likely to occur. These examples are used to frame the managerial issues surrounding the production process for intermediaries and to discuss the regulatory process for those intermediaries.
This paper reviews the extant empirical studies of financial innovation. Adopting broad criteria and spanning a long time horizon, we found surprisingly few studies (39), with most (23) having been conducted since 1998. Especially striking is that only two studies test hypotheses advanced in many descriptive articles as to the economic/environmental conditions that encourage financial innovation. We offer conjectures as to why empirical studies of financial innovation are comparatively rare, including as a culprit the absence of accessible data. We urge financial regulators to undertake more surveys of financial innovation and to make the resulting data available to researchers.
This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection as well as empirical evidence on the effects of patent rights. Then, the second part considers the international aspects of IPR protection. In summary, this paper draws the following conclusions from the literature. Firstly, different patent policy instruments have different effects on R&D and growth. Secondly, there is empirical evidence supporting a positive relationship between IPR protection and innovation, but the evidence is stronger for developed countries than for developing countries. Thirdly, the optimal level of IPR protection should tradeoff the social benefits of enhanced innovation against the social costs of multiple distortions and income inequality. Finally, in an open economy, achieving the globally optimal level of protection requires an international coordination (rather than the harmonization) of IPR protection.
Applied Multivariate Research: Design and Interpretation
- L S Meyers
- G Gamst
- A J Guarino
Meyers, L.S., Gamst, G. and Guarino, A.J. (2006) Applied Multivariate Research: Design and
Interpretation, Sage, Thousand Oaks.
World DataBank: The Explore. Create. Share -Development Data
- World Bank
World Bank (2012) World DataBank: The Explore. Create. Share -Development Data [online]
http://databank.worldbank.org/data/home.aspx (accessed 1 October 2012).