Innovation in the Retail Banking Industry: The Diffusion of Credit Scoring
AbstractWe study technology diffusion in the retail banking industry. Our contribution to the empirical literature is twofold: Firstly, we explore technology diffusion in the financial sector, whose relevance has often been neglected; secondly we focus on credit scoring adoption, a relevant process innovation still under-explored. Estimating a set of duration models, we analyze the patterns of diffusion of this technology among Italian banks. We find that credit scoring is firstly introduced by large banks with broad branch networks, which can fully exploit scale economies. We present robust evidence that banks with large market shares operating in more concentrated markets are early adopters, providing a direct support of the Schumpeterian hypothesis that market power enhances innovation. Copyright Springer 2006
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Bibliographic InfoArticle provided by Springer in its journal Review of Industrial Organization.
Volume (Year): 28 (2006)
Issue (Month): 4 (June)
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Web page: http://www.springerlink.com/link.asp?id=100336
credit scoring; innovation; mortgage loans; retail banks; technology diffusion; G21; O31; C41;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
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