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Schumpeterian competition and efficiency among commercial banks

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  • Duygun, Meryem
  • Sena, Vania
  • Shaban, Mohamed

Abstract

In this paper, we aim to fill the gap in the banking literature by quantifying the impact that the Schumpeterian competition mode – i.e. competition through the launch of new products (or new varieties of products) – has on the cost and profit efficiency of a sample of commercial banks based in the United Kingdom. We estimate both a cost and an alternative profit frontier on an unbalanced panel of UK commercial banks over the period 2001–2012. The intensity of competition through product innovation is proxied by the trademark intensity (i.e. the ratio between the number of trademarks registered in a given year by all the commercial banks – net of the trademarks registered by the bank under observation – and the employment in the sector) in the commercial banking sector. Our results show that the (lagged) trademark intensity in the commercial banking sector does affect negatively the mean cost and profit efficiency in the sector but there is evidence that as trademark intensity increases in the sector, commercial banks react by improving their cost and profit efficiency.

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  • Duygun, Meryem & Sena, Vania & Shaban, Mohamed, 2013. "Schumpeterian competition and efficiency among commercial banks," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5176-5185.
    • Handle: RePEc:eee:jbfina:v:37:y:2013:i:12:p:5176-5185
    DOI: 10.1016/j.jbankfin.2013.07.003
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    Cited by:

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    2. Shiyi Chen & Wolfgang K. Härdle & Li Wang, 2020. "Estimation and determinants of Chinese banks’ total factor efficiency: a new vision based on unbalanced development of Chinese banks and their overall risk," Computational Statistics, Springer, vol. 35(2), pages 427-468, June.
    3. Vaneet Bhatia & Sankarshan Basu & Subrata Kumar Mitra & Pradyumna Dash, 2018. "A review of bank efficiency and productivity," OPSEARCH, Springer;Operational Research Society of India, vol. 55(3), pages 557-600, November.
    4. Thanh Pham Thien Nguyen & Son Hong Nghiem & Eduardo Roca & Parmendra Sharma, 2016. "Bank reforms and efficiency in Vietnamese banks: evidence based on SFA and DEA," Applied Economics, Taylor & Francis Journals, vol. 48(30), pages 2822-2835, June.
    5. Dong, Yizhe & Firth, Michael & Hou, Wenxuan & Yang, Weiwei, 2016. "Evaluating the performance of Chinese commercial banks: A comparative analysis of different types of banks," European Journal of Operational Research, Elsevier, vol. 252(1), pages 280-295.
    6. Lee, Chien-Chiang & Wang, Chih-Wei & Ho, Shan-Ju, 2020. "Financial innovation and bank growth: The role of institutional environments," The North American Journal of Economics and Finance, Elsevier, vol. 53(C).
    7. Abreu, Emmanuel Sousa de & Kimura, Herbert & Sobreiro, Vinicius Amorim, 2019. "What is going on with studies on banking efficiency?," Research in International Business and Finance, Elsevier, vol. 47(C), pages 195-219.
    8. Silva, Thiago Christiano & Guerra, Solange Maria & Tabak, Benjamin Miranda & de Castro Miranda, Rodrigo Cesar, 2016. "Financial networks, bank efficiency and risk-taking," Journal of Financial Stability, Elsevier, vol. 25(C), pages 247-257.
    9. Yougen Cao & Shengce Ren & Mei Du, 2022. "Strategic trademark management: a systematic literature review and prospects for future research," Journal of Brand Management, Palgrave Macmillan, vol. 29(5), pages 435-453, September.
    10. Cheng, Maoyong & Qu, Yang & Jiang, Chunxia & Zhao, Chenchen, 2022. "Is cloud computing the digital solution to the future of banking?," Journal of Financial Stability, Elsevier, vol. 63(C).
    11. Faluk Shair & Na Sun & Sun Shaorong & Firdos Atta & Muhammad Hussain, 2019. "Impacts of risk and competition on the profitability of banks: Empirical evidence from Pakistan," PLOS ONE, Public Library of Science, vol. 14(11), pages 1-27, November.
    12. Francisco Javier Sáez-Fernández & Andrés J. Picazo-Tadeo & Mercedes Beltrán-Esteve & Caroline Elliott, 2015. "Assessing the performance of the Latin American and Caribbean banking industry: Are domestic and foreign banks so different?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1006976-100, December.
    13. Bayeh, Antonio & Bitar, Mohammad & Burlacu, Radu & Walker, Thomas, 2021. "Competition, securitization, and efficiency in US banks," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 553-576.
    14. Michael Adusei & Caroline Elliott, 2015. "Bank profitability: Insights from the rural banking industry in Ghana," Cogent Economics & Finance, Taylor & Francis Journals, vol. 3(1), pages 1078270-107, December.
    15. Shaban, Mohamed & James, Gregory A., 2018. "The effects of ownership change on bank performance and risk exposure: Evidence from indonesia," Journal of Banking & Finance, Elsevier, vol. 88(C), pages 483-497.
    16. Nasirov, Shukhrat, 2020. "Trademark value indicators: Evidence from the trademark protection lifecycle in the U.S. pharmaceutical industry," Research Policy, Elsevier, vol. 49(4).
    17. Shiyi Chen & Wolfgang K. Härdle & Li Wang, 2014. "Estimation and Determinants of Chinese Banks’ Total Factor Efficiency: A New Vision Based on Unbalanced Development of Chinese Banks and Their Overall Risk," SFB 649 Discussion Papers SFB649DP2014-068, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    18. Kozak Sylwester & Wierzbowska Agata, 2021. "Banking Market Concentration and Bank Efficiency. Evidence from Southern, Eastern and Central Europe," South East European Journal of Economics and Business, Sciendo, vol. 16(1), pages 38-52, June.
    19. Douglas José Mendonça, Júlia Alves e Souza, Francisval de Melo Carvalho, Gideon Carvalho de Benedicto, 2020. "Relationship between Efficiency and Profitability in Banks of Brazil," Journal of Finance and Economics Research, Geist Science, Iqra University, Faculty of Business Administration, vol. 5(1), pages 1-17, March.

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    More about this item

    Keywords

    Trademarks; Competition; Cost efficiency; Profit efficiency; Commercial banks;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising

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