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From Hierarchy to Market: the Changing Industrial Organization of Epistemic Communities During Hong Kongs Transition to a Cashless Society (1965-2005)

Author

Listed:
  • Bernardo Batiz

    (Bangor University)

  • Andrew Smith

    (University of Liverpool)

Abstract

This paper documents how computer technology modified retail financial markets in Hong Kong in the period from the 1960s to the early 2000s. The forty years after the deployment of Hong KongÕs first computer in 1965, saw a dramatic change in retail banking technology as Hong Kong moved towards being a cashless society. Prior to that pivotal year, none of the colonyÕs banks used computers whilst retail customers accessed their liquid balances via cash and cheques and only during banking hours. Over time, the ways in which people spent money became more diverse and transformed with the advent of technologies such as the ATM, point of purchase debit card terminals, the Octopus chip, and mobile phone payments. One could construct a straightforward narrative arc that links the acquisition of HSBCÕs first computer in 1967 to the proliferation of electronic payment systems in the twenty-first century. Such a narrative, however, would obscure an important discontinuity in the history of retail payment technology. In the early stages of Hong KongÕs transition to the cashless society, the relevant technologies were installed and managed within the boundaries of large financial intuitions such as HSBC. The second episode discussed in this paper is the successful launch of a micro-payments solution called ÒOctopusÓ. Initially designed as a transport payments card, cash balances stored within a smart chip grew outside financial institutions to become the leading payment solution in small value transactions. Over the course of the period covered by this article, the industrial organization of the relevant technologies transformed as the provision of much of the technology for retail payments had been outsourced to non-bank, non-financial institutions. In other words, the industrial organization of the relevant technologies had been transformed. This paper seeks to account for this shift in the organization of payments technology by drawing on literature around the boundaries of the firm as well as the theory of the firm as an epistemic community. It will be suggested that this process of vertical disintegration (i.e., a shift from hierarchy to markets) took place because of changes in the underlying conditions in Hong KongÕs economy.

Suggested Citation

  • Bernardo Batiz & Andrew Smith, 2014. "From Hierarchy to Market: the Changing Industrial Organization of Epistemic Communities During Hong Kongs Transition to a Cashless Society (1965-2005)," Working Papers 14003, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
  • Handle: RePEc:bng:wpaper:14003
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    File URL: http://www.bangor.ac.uk/business/research/documents/BBSWP14003.pdf
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    More about this item

    Keywords

    cashless; computers; contactless payments; HSBC; Octopus; Hong Kong;
    All these keywords.

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • L63 - Industrial Organization - - Industry Studies: Manufacturing - - - Microelectronics; Computers; Communications Equipment
    • N85 - Economic History - - Micro-Business History - - - Asia including Middle East
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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