IDEAS home Printed from https://ideas.repec.org/a/taf/macfem/v2y2009i1p31-57.html
   My bibliography  Save this article

Strategic groups and heterogeneous technologies: an application to the US banking industry

Author

Listed:
  • Dan Wang
  • Subal Kumbhakar

Abstract

Using the US banking industry data during 1991-2000, this paper carries out a cluster analysis to segment banks into distinct strategic groups in terms of their product mix and allocation of inputs. We then investigate the production technology and cost structures for banks in each strategic group. A system of cost function and derived share equations is used to estimate the technology for each group. The distributions of returns to scale and technical change for each strategic group are also examined. Our results support the presence of seven distinct strategic groups and heterogeneous technologies in the US banking industry. We also find variations in returns to scale and technical change across strategic groups and over time. By allowing technologies to differ across strategic groups, our results show the presence of increasing, constant, and decreasing returns to scale in different strategic groups. In contrast, if one follows the conventional cost function approach which assumes a single homogeneous technology, one would conclude erroneously that the US banking industry is characterized by decreasing returns to scale. Based on these findings we conclude that the results based on a single homogeneous technology are likely to misrepresent the US banking industry.

Suggested Citation

  • Dan Wang & Subal Kumbhakar, 2009. "Strategic groups and heterogeneous technologies: an application to the US banking industry," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 2(1), pages 31-57.
    • Handle: RePEc:taf:macfem:v:2:y:2009:i:1:p:31-57
    DOI: 10.1080/17520840902726268
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/17520840902726268
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/17520840902726268?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michaelides, Panayotis G. & Tsionas, Efthymios G. & Vouldis, Angelos T. & Konstantakis, Konstantinos N., 2015. "Global approximation to arbitrary cost functions: A Bayesian approach with application to US banking," European Journal of Operational Research, Elsevier, vol. 241(1), pages 148-160.
    2. Hakan Güneş & Dilem Yıldırım, 2016. "Estimating Cost Efficiency of Turkish Commercial Banks under Unobserved Heterogeneity with Stochastic Frontier Models," ERC Working Papers 1603, ERC - Economic Research Center, Middle East Technical University, revised Mar 2016.
    3. Pavlos Almanidis, 2013. "Accounting for heterogeneous technologies in the banking industry: a time-varying stochastic frontier model with threshold effects," Journal of Productivity Analysis, Springer, vol. 39(2), pages 191-205, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:macfem:v:2:y:2009:i:1:p:31-57. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/REME20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.