How Chinese commercial banks innovate: process and practice
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Abstract
This paper describes the financial innovation approach and process adopted by large commercial banks operating in China. Data are collected from three case firms using a qualitative case study method. The research shows that regulation can be a catalyst or a hindrance to financial innovation, depending upon the degree of coherence between a bank’s innovation strategy and local government policy. Performance pressure helps drive innovation, whereas organisational bureaucracy and trajectory are major barriers to innovation. Banks adopt different approaches to the innovation process due to differences in institutional arrangement and institutional environment. Practitioners should consider the institutional effects when engaging in financial innovation. This research contributes to current practice by pointing out an integrated approach to financial innovation and regulatory dialectic.
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