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A demand-driven innovation insight in the banking industry

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  • Fransesc Relano
  • Elisabeth Paulet

Abstract

There are two major types of financial innovations: one which is profit-seeking and supply-driven; another which is mostly demand-driven, outward-looking and socially oriented. We illustrate this twofold perspective analyzing the behavior of the banking industry during the period of the subprime mortgage crisis. More precisely, we examine how the financial statements of different types of banks are linked to innovation theories. From this analysis it emerges that, unlike mainstream banking, only the so-called ethical banks can be said to be putting into effect a demand-driven type of financial innovation in their banking practice. It is also argued that this involves a distinct business model. The last part of the paper explores briefly to what extent this demand-driven innovation approach to banking makes sense in the context of the post-financial crisis. JEL Codes: G21, L19, L2, G32

Suggested Citation

  • Fransesc Relano & Elisabeth Paulet, 2016. "A demand-driven innovation insight in the banking industry," Journal of Innovation Economics, De Boeck Université, vol. 0(2), pages 179-195.
    • Handle: RePEc:cai:jiedbu:jie_020_0179
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    Keywords

    ethical banks; stakeholder-based banks; shareholder-based banks; innovative banking practices; business model;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • L19 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Other
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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