How do Vehicles of Innovation Match the Capability Building Needs for Competitive Survival in the Future? A Closer Look at the Emerging Context of the Banking Industry and the Action Taken by Two Incumbents

Jacqueline Isabelle Odin & Ømjer Gehrken Hjeltnes

Student thesis: Master thesis

Abstract

The thesis seeks to explore how strategic measures taken by banks enable them to build the capabilities that will be required in the future context of the financial services industry. The theoretical framework underlying the analysis is mainly based on dynamic capability theory, and further extended with theory on dual business model and open innovation. To explore how incumbent banks can develop capabilities, the thesis combines two research methods in a two-stage analysis. First, the thesis explores developments in the financial services industry and the future roles of banks. Based on the future scenarios of banks, and drawing on dynamic capability view, the thesis provides a categorisation of dynamic capabilities that could enable banks’ competitive survival. The second stage of the thesis’ analysis explores how two incumbent banks use vehicles of innovation and how these vehicles contribute to the banks’ dynamic capabilities. The individual case analyses are followed by a cross-case discussion that aggregates and compares the findings from the two cases.
The scenario analysis uncovered three potential roles of banks in the future; distributed bank, disintermediated bank and bank as a utility. By applying theories of dynamic capability to these scenarios, three categories of dynamic capabilities required for competitive survival was conceptualised; act, protect and discover. Danske Bank’s use of vehicles was primarily found to enable the pursuit of capabilities to act. Santander engages in a broader range of activities, which were found to enable a more diverse set of capabilities.
The thesis provides an initial framework for holistically considering banks’ dynamic capabilities, by conceptualising them into three categories. The research also provides insight into how current developments in the financial services industry might impact the capabilities necessary for incumbent banks’ competitive survival.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2017
Number of pages132