Is Competition Among Cooperative Banks a Negative Sum Game?

Does ‘inner’ competition – rivalry among network members – worsen performance in a network of cooperative banks? Inner competition might, in fact, endanger network-dependent scale economies. We test our hypothesis on Banche di Credito Cooperativo (BCCs), Italy’s network of mutual cooperative banks. We find a worsening of performance both at incumbent and (even more) at aggressor BCCs when they compete among themselves. Instead, the worsening is mild when BCCs compete with non-BCC comparable banks. We conclude that inner competition among cooperative banks is a negative sum game and, thus, limiting it would be desirable to preserve the stability of cooperative banking networks.