Factors Influencing Competitive Advantage in Banking Sector: A
Systematic Literature Review
Emad Ali Kasasbeh,
Idris Md Noor
Background: The economic importance of banking institutions to national development has been a motivating factor for the sectors bid towards developing and implementing arrays of frameworks for competitive advantage. Competitive advantage as an organizational construct has also been disparately defined and conceptualized in different terms and measures, many of these are inconsistent with bankings institutional focus. The inability to properly contextualize and conceptualize competitive advantage for the banking sector is arguably responsible for the lack of comprehensive identification of its antecedent factors. Materials and Methods: This study employed Systematic Literature Review (SLR) as a research method. The SLR consists of review protocol which specifies the topic to be researched and the method customized in conducting the review. It is the main strategy of detecting relevant literature review and how information is obtained from the primary study. Planning the review, conducting the review and reporting the review are other phases of the SLR method. Results: The study found that quality of service or/and management, corporate social responsibility, strategy formulation, (electronic) marketing innovation and creativity, among others are factors influencing competitive advantage in the banking sector. Conclusion: Competitive advantage can be conceptualized with measurable financial and/or non-financial dimensions and tested in future empirical studies for model fitness.
Received: December 03, 2016;
Accepted: February 24, 2017;
Published: March 15, 2017
The global practice of banking organizations is to stimulate national economic growth by increasing operating revenues, deposit and credit facilities. The banking sector is also responsible for financing investment portfolio, generate high revenue and expand the national reserve1. In events of economic recession and adversities, the bank helps in hedging risk and financing tangible investments2. Banks are expected to be well-capitalized and imbibe restricted lending culture to avail the much needed sustainable growth and development3,4. These are the essences of banking sectors support to national economic growth and development and why attaining competitive advantage has always been the priority of the actors in the sector.
Competitive advantage as a broad concept deals with business engineering process (BRP) that will put the organization in a lead among other competitors within their sector5. It specifically addresses what the organization has in stock that will achieve advantage in the competitive market. In these stances, constructs like strategic planning, competitive intelligence, corporate social responsibility, innovation and creativity are used as synonyms to competitive advantage6-8. On another hand, competitive advantage is seen as a performance construct which shows a phenomenon of organizational progress. In such cases, constructs like organizational performance, operational efficiency, financial performance, financial sustainability, organization creativity8 and innovation9,10 have also been used in describing competitive advantage10-13.
This notable disparity in the conceptualization and operationalization of competitive advantage, more specifically in the narrow context of banking sector, motivated this study. This study has two-pronged contributions; first, it presents a broad view of competitive advantage as an organization construct and its measuring dimensions in relationship with its role in a conceptual model. Second, using Systematic Literature Review (SLR), this study identifies the antecedent factors of competitive advantage in the banking sector.
MATERIALS AND METHODS
The research method employed in this studys research design is SLR. Research design is a systematically-arranged plans or procedures based on certain assumptions, to answer the studys research questions14. The research questions of this study can be summarized into two: (a) What are the measuring dimensions of competitive advantage and (b) What are the factors influencing competitive advantage in the banking sector?
The SLR is a method of identifying, evaluating and interpreting available information regarding a research topic, topical questions or interest15,16. It is purposively used to gather available and related evidences to a phenomenon under investigation and summarize empirical evidences for the benefits of the research. The SLR usually defines the review protocol by specifying the topic to be researched and the method customized in conducting the review. It is the main strategy of detecting relevant literature review and how information is obtained from the primary study16,17. The three main phases in SLR are (a) Planning the review, (b) Conducting the review and (c) Reporting the review16. Figure 1 depicts the SLR research design.
Planning the review: Planning the review phase is essential in achieving an unbiased result. At this phase, the researcher sets the requirement necessary to collate broad and objective information critiqued in answering the research questions. In this regard, past related studies are sought and collated. To achieve this, "Competitive advantage in banking sector", "Measuring competitive advantage" and "Financial and non-financial measures of competitive advantage" are used as search strings to identify the primary sources of information that are related to the subject matter. Articles that are not related to the defined themes are excluded from the collation.
Conducting the review: The review is conducted using Ahmed and Salim15 Population-Intervention-Comparison-Outcome-Context (PICOC) format.
|Fig. 1:|| SLR research design (Adapted from Kitchenham16)
The population describes the general theme of the articles reviewed in the study. The intervention is the converging points of the objectives to be achieved by this study and the comparison is to situate the findings within the body of knowledge and in relationship with past related studies. The outcomes are the findings of the review process. Table 1 presents the PICOC review method as it relates with this study.
Reporting the review: The findings of the SLR are reported through a step-by-step description and explanation of the phases conducted and the result found through the research process.
Conceptualizing competitive advantage for banking organization: The conceptualization of organization competitive advantage is often determined by the nature of the organization being investigated. In financial institutions or studies that measured competitive advantage using financial measures, it is defined as the yearly turn-out profit of the company, measured by Return of Equity (ROE) or/and Return on Assets (ROA)6-9,13,18,19. In these studies, competitive advantage is investigated as the dependent variable i.e., the consequence.
From the non-financial measure perspective, competitive advantage is defined as the innovative ideas and creative product development process of the organisation7,9,19-21. It is also defined as service development and increase in sales and growth8,11,22,23, service quality10,23,24, responsiveness to customers, organizational core competence and cost effectiveness6,12,25-27. Kuettner and Schubert28, Wang and Hong29, Militaru and Ionescu30 and Schatz and Bashroush27 conceptualized and measured competitive advantage as organizations strategic planning and corporate social responsibility. Notably, in studies that investigated competitive advantage using non-financial measures, it is investigated as moderator, mediator or antecedent variable to the actualization of organization performance.
In summary, competitive advantage is the same term as firm/organization performance when measured with constructs that reflect the organization growth or in terms of innovation and other associated constructs. In either of these cases, the position of the construct in the research model determines the adopted measuring dimensions. This clearly shows that strategy, through different conceptualizations like innovation, quality management and corporate social responsibility have been found to be related with competitive advantage. Table 2 and 3 present the summaries of the review on competitive advantage and the dimensions of competitive advantage when investigated as dependent (i.e., consequence) and independent (i.e., cause) variable, respectively.
Antecedents factors of competitive advantage: Several previous studies have attempted to conceptually discuss banking institutions competitive advantages with respect to its causative factors generally35-37. Some of these studies36,37 showed encouraging levels of effectiveness in many dimensions of composite marketing strategies with adequate managerial recommendations. Table 4 presents the antecedent factors of competitive advantage and the relationship as shown in the empirical findings.
The antecedents factors of competitive advantage are found to be (electronic) quality of service or/and management, corporate social responsibility, strategy formulation, (electronic) marketing innovation and creativity, customer orientation and market differentiation. Others are firms performance, core competence, increased sales, business efficiency, product value, effective cost, product customization, customer service and satisfaction, usability, sales management activities, market-oriented product management activities, sales performance and efficiency. Identifying these antecedents are essential for conceptualizing and investigating constructs that are related to competitive advantage in the banking sector and extending the previously-proposed related conceptual models.
|Table 1:|| PICOC review method
|Table 2:|| Summary of the review on competitive advantage
|Table 3:|| Summary of dimensions where competitive advantage are studied as independent variable
The financial measures are mostly characterized with Return on Assets (ROA) and Return on Equity (ROE) to measure yearly turn-out profit of the company. They are used as metrics when competitive advantage is investigated as dependent variable. Creative product development process best explained the non-financial measure. Responsiveness to customers, organization core competence and cost effectiveness are also examples of the non-financial measures of competitive advantage and when it is mostly investigated as independent variable. The relationship between the measures of the competitive advantage and the position of the construct in the conceptual model is also an interesting niche for research exploration. The definition of competitive advantage provided by Ward and Peppard5, being a broad concept that deals with business engineering process (BRP) in view of ensuring organizations are edges over their competitors is acceptable. However, financial and non-financial measuring dimensions that will reflect provisions of Vahid et al.10, Majeed11, Agha et al.12 and Wagner and Weitzel13 are encouraged for a comprehensive construct measurement and reliable data gathering.
Also, the identified antecedent factors of competitive advantage, among other are customer orientation and market differentiation, firms performance, core competence and increased sales. Identifying these factors that influence competitive advantage in banking sector will contribute to practitioners understanding of the practical factor that are related to achieving competitive advantage.
|Table 4:|| Summary of the antecedent factors of competitive advantage
This provides a more expansive content of antecedent factors of competitive advantage in banking sectors, compared to what was reported by Heywood and Kenley21, Giudice and Peruta23, Militaru and Ionescu30, Mimosette and Djeumene34, Barrett et al.9, Majeed11, Prescott19 and Kraja and Osmani31, among others. On another end, theorists and researchers can explore this to understand how further researches that will contribute to the extension of the body of knowledge can be achieved.
The economic importance of banking institutions on national development and human capital growth is a motivating factor for researches in the area. Competitive advantage of the banking institutions is therefore an important institutional framework to achieve success in the global competitive market. The role of banking organization in risk hedging and as economic shock absorber must be strengthened with continuous innovative banking practices. It is against this backdrop that this study is conducted to identify the factors that influence competitive advantage in banking organizations and conceptualized the construct through both financial and non-financial perspectives.
The significances of this study, among others are:
||It provides a banking institutional focus definition for competitive advantage that measures both financial and non-financial dimensions
||It identifies the antecedent factors of competitive advantage in the banking sector
||It presents the methodological approach of using Systematic Literature Review (SLR) in answering research questions
I would like to thank all those who participated in this study, my supervisor and the co-supervisor for sharing their experiences with us and School of Business Innovation and Technopreneurship, University Malaysia Perlis.
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