Chapter 1: Introduction
5.1 Discussion
Since the Taiwanese banks are facing the problem of “over-banking”, setting overseas branches to expand the market, or adopting innovation are both the possible solutions. However, there are many syudies about location factors of the overseas or different kinds of financial innovation, but there are few studies discussing the relationship of overseas branches and innovation performance in banking industry.
Futhermore, we are the first study to reframe the strategic roles of the overseas branches with Bartlett and Ghosal’s model.
There are two main purposes of this research. One is to create a new profile of each bank. Namely, we reveals that there are not only two strategies that deicided by the location factors. The banks should consider the competence of each branch which divides the generic roles of overseas branches into four. The other purpose is to cross examine their overseas-branch profiles with the innovation prize winners. Hence, we tried to prove that banks with more overseas branches in roles of “strategic leader”
and “black hole” are more likely to have better innovation performance.
Through composing and anaylzing the profiles of the overseas branch for each bank, we have discovered some interesting findings. Most of the banks correspond to our proposition about the positive relationship of financial innovation performance
and the amount of overseas branches in roles of “strategic leader” and “black hole”.
However, there are some outliers in our analysis. Those banks happen to be state-owned banks. Therefore, in order to explore the real reason of not showing the positive correlation, we conducted an interview with one of the Taiwan governmment owned banks. It turns out the reason for those Taiwan governmment owned banks possessing many overseas branches in roles of “strategic leader” and “black hole” but not improving their innovation performance is that they lacks the motivation of innovation. Those Taiwan governmment owned banks have sufficient client resource.
The phenomenon of “over-banking” has less influence on them. As a result, instead of spending money and energy on adopting innovation, they prefer staying risk-aversion and exploit their present resource.
The second finding is about the roles of overseas branch are dynamic. The profile of the overseas branches only indicates their present distribution. If those branches have been improved their compentence, they could shift to another role.
Therefore, we proposed that the branch in role of “black hole” could be changed into
“strategic leader” as long as the competence of the overseas branch has been improved. In order to prove our proposition, we conducted another face to face interview with SCSB to explore the improvement process of SCSB’s Hong Kong branch which has been evaluted from “black hole” to “strategic leader”. The major change of SCSB’s Hong Kong branch is the extension of product and service variety, for the headquarrters had changed its manage attitute toward their overseas branch.
Furthermore, there are many latest financial ideas in Hong Kong that are easily to access. And through the accumulation of the branch’s age, the competence of the branch has been improved and is moving rightward to the “strategic leader” on the
graph. We suggest that every bank should not ignore the way to improve its overseas branches.
The third finding is about the phychological distance of those overseas branches.
There is an interesting fact we found in those profiles, which is that every Taiwanese bank has set one of their overseas branches in Hong Kong, and about 80% of them have also set an overseas branch in Singapore. These two places are the only two financial centers in the world that have Chinese as one of their official languages and also adopt chinese culture. If Taiwanese banks want to set overseas branch to gain access to lateset financial products/services, these two places should be their first choice. Due to the shorter phychological distance of these two places in Taiwan, the Taiwanese bankers would face fewer uncertainty risks or culture shocks (Roberts and Arnander, 2001). Besides the advantage of management of the overseas branches in these two places, maybe for future research, we could explore if the innovation is more easily to adopt in these two places.
To sum up, the research is made for two purposes: one is to reframe the generic roles of overseas branches, the other is to prove the number of overseas branches in roles of “strategic leader” and “black hole” is positively related to innovation performance. And by adopting the analytical approach, the research findings are mainly about three issues: one is about the two different kinds of banks, the privately owned banks and the state-owned banks. Different management styles results in different motivation toward innovation adoption. The second issue is about the movement of the strategic roles. The third is about the psychological distance of Hong Kong, Singapore and Taiwan.
5.2 Limitations
Despite the novelty of the reasearch, there are some limitations that are hard to overcome. First of all, there is a limitation of the research samples. Taiwanese privately owned banks with overseas branches so far are only the seven privately owned banks selected in the reasearch. Perhaps in the future there will be more Taiwanese privately owned banks set up overseas branches, and the research result will be more prominent.
Secondly, the proxies for estimating the competence of local organization in Bartlett and Ghosal’s model is limited due to the difficulty of data collection. So far, we adopts the four proxies: (1) branch’s age, (2) variety of products and services, (3) ROA and ROE performance of the bank, (4) evalution of the website. However, we failed to get each overseas branch’s labor amount and market share. Because the overseas branch’s labor amount and market share are not the open data for the public.
Banking industry compares to the other industries is more conservative, which enhances the difficulty of data collection in this research.
Although there are some limitations in this research, we have tried our best to weaken the influence. The four chosen proxies for the competence of local organization become much more sufficient after weighted on certain parts. Perhaps, for the future research, if possible, researchers could go to those countries and conduct surveys for the oversesa branches of each bank, and then calculte the market shares of each branch.
5.3 Contributions & lmplications
There are several managerial implications and contributions in this study. First of all, this study is the first research that cross examine the correlation of overseas branches’ strategic roles and the financial innoation performance. There are few studies apply susidiary strtegic roles in innovation performance research. The former studies are mostly discussing susidiary strtegic roles and their autonomy. In addition, the managerial implication of this study is to illustrate the purposes of setting overseas branches are not only to expand the market, but also to get access to latest financial ideas, and improve innovation performance of the bank.
Secondly, the adapted four different strategic roles in this study are worthwhile for bankers to consider before setting overseas branches. The four generic roles implys the different appropriate strategies in different environment and competence.
With this modified theory model, bankers can reconsider their overseas-expanding strategy. Furthermore, for future researchers, they could keep tracks of those bankers, and to see if their overseas-branch profiles could reflect their overseas expanding strategy.
To sum up, this study is the first to combine the two issues of overseas branches and financial innovation performance, and moreover, adopting the theory of Bartlett and Ghoshal. This study creates lots of possibilities of future researches. In addition, this research provides a new way for Taiwanese bankers to reconsider their overseas expanding strategy. We hope that this study would encourage Taiwanese bankers to emphasize the importance of financial innovation. With better financial innovation performance, Taiwan banking industry would overcome the difficulty of
“overbanking”, and once again become competitive in global market.
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48
Ten Selected Taiwanese Banks and Overseas Branches
Source: The official websites of banks;
50
Appendix 2
The Index of Economic Freedom 2014
C ountry
Source: the Heritage Foundation 2014 http://www.heritage.org/index/
銀行名稱 金融創新獎項
2008 Product Innovation Prize- Best International Development Award -- TABF
2014 Foreseeing Innovative New Digi-sevice Top 10 Service Brand Award -- Institute for Information Industry
2. 2013.12 中國信託金控榮獲經濟部工業局「2013 臺灣創新企業 20 強」
2013 Taiwan Innovative Company Top 20– In d ustrial Development Bu rea u, M inistry o f Economic Affai rs
3. 2012.11 中國信託金控榮獲經濟部工業局「2012 臺灣創新企業調查」前 20 強企業
2012 Taiwan Innovative Company Survey Top 20 —
In d ustrial Development Bu reau, M inistry o f Economic Affairs
4. 2011.01 中國信託商業銀行榮獲中國生產力中心「彩蝶獎創新形象大獎」。
2011 Creative Image Award-- CPC
5. 2011.11 中國信託金控榮獲經濟部工業局「2011 台灣創新企業調查」前 20 強企業。
2011 Taiwan Innovative Company Survey Top 20 —
In d ustrial Development Bu reau, M inistry o f Economic Affairs
6. 2010.09 中國信託商業銀行榮獲卓越雜誌金融證券獎評比「最佳企業形 象獎」及「最佳產品創新獎」
Best Corporate Image Award & Best Product Innovation Award – Financial Service Survey by Excellence Monthly
7. 2009.12 中國信託商業銀行榮獲第八屆金鉅獎「年度創新設計獎 」2009
The 8th Annual Innovative Design Award--OEMCRPC 國外獎 International Prize
1. 2012.08 中國信託商業銀行榮獲 Financial World 雜誌評選為「批發金融服
務類-客戶價值提案暨產品創新獎」
Innovation in customer propositions and product design-Financial services (Wholesale) ---Financial World, Aug 2012
2. 2010.12 中國信託商業銀行榮獲 Financial-i 雜誌 2010 年亞洲區最佳創新 有價證券服務提供者獎項。
Appendix 3
The List of the Financial Innovation Prizes Won by the Ten Selected Banks from 2007~2012
52
Leasers in Innovation Award for the Best and Most Innovative Securities Services Provider in Asia 2010 --- Financial-i, December 2010
3. 2011.01 中國信託商業銀行榮獲國際數據公司 2011 亞太創新大獎評選為
「金融產品創新獎」
Product Innovation (Financing Product) --- IDC Financial Insights, January 2011 (Employee Stock Option (ESO) Financing and Cash Settlement Service plus e-Banking project)
4. 2011.11 中國信託商業銀行榮獲 Financial-i 雜誌 2011 年創新領導獎－有價 證券服務類最佳客戶實施創新獎。
Most Innovative Customer Implementation --- Financial-i Nov, 2011
5. 2008.03 中國信託商業銀行榮獲「亞洲華爾街日報－亞洲 200 讀者報告」
2007 年創新類別第一名。
Asia’s 200 Most Admired Companies 2007 --- The World Street Journal Aisa, March 2008
2012 Best Electronic Cash Flow Practice Innovation Award-- FISC 2. 2012【台灣金融研訓院菁業獎】「最佳信託金融獎」
2012 Product Innovation Prize- Best Trust Fund Practice Award -- TABF 3. 2012【台灣金融研訓院菁業獎】「最佳業務創新獎」佳作
2012 Taiwan Banking and Finance Best Practice Awards-- TABF 4. 2012【台灣金融研訓院菁業獎】「最佳電子金融獎」佳作
2012 The Award for Best Electronic Banking-- TABF
5. 2008【台灣金融研訓院菁業獎】「最佳業務創新獎」佳作 2008Taiwan Banking and Finance Best Practice Awards-- TABF 國外獎 International Prize
1. 2014 國際資訊公司金融子公司金融創新大獎(2014，FIIA 2014)分析暨客 戶洞察力亞太區國際大獎
FIIA 2014 for Analytics and Customer Insights-- IDC Financial Insights 2. FIIA (Financial Insights Innovation Awards) 2007 for Payment Solutions--
The Best Electronic Banking Award-- TABF
2. 2010【台灣金融研訓院菁業獎】 最佳國際發展獎 The Best International Development Award-- TABF
5. 華南銀行 2010 The Award for Best Electronic Banking-- TABF 6. 富邦金控
2012 The Award for Best Customer Risk Management—TABF 國外獎 International Prize
1. 2010 IDC 客戶風險管理創新獎
FIIA 2010 for Innovation in Customer Risk Management 2. 2010 萬事達卡國際組織台灣信用卡最佳創新產品獎
FIIA 2010 for Innovation in Customer Risk Management 2. 2010 萬事達卡國際組織台灣信用卡最佳創新產品獎