The impact of scale effects on the prevailing internet-based banking model in the US |
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Authors: | Alexandre Momparler Francisco J Climent Jose M Ballester |
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Institution: | (1) Department of Corporate Finance, Universitat de Val?ncia, Av. Tarongers s/n, 46022 Valencia, Spain;(2) Department of Financial Economics, Universitat de Val?ncia, Av. Tarongers s/n, 46022 Valencia, Spain |
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Abstract: | Internet-based banks use a technology-intensive production process that may benefit from scale effects as they grow larger.
This article analyzes whether the predominant Internet-primary bank in the USA generates technology-based economies of scale
in the period 2002–2010. There is evidence of both favorable and adverse technology-based scale effects. As the leading Internet-primary
bank gets larger, the financial performance gap with traditional banks shrinks while some of its critical competitive advantages
wear down. The results suggest that unless the prevailing Internet-primary bank preserves the distinctive advantages of the
Internet-based business model as it improves financial performance, it might end up converging with its branching competitors. |
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