Alternatives within National Financial Systems: Innovation, Heterogeneity, Sustainability

Luca Andriani
Session Organizers:
Sue Konzelmann and Olivier Butzbach
Donald Nordberg
Friday, 3 July 2015: 2:15 PM-3:45 PM
CLM.2.05 (Clement House)
In the wake of the 2007-08 global banking crisis, much blame has been laid on the business model prevalent in the banking industry, a model geared towards excessive leverage and diversification and over-emphasis of short-term financial performance targets. More importantly, scholars and policy-makers alike have identified the excessive homogeneity of financial systems as a key source of macro-prudential risk. Hence a growing interest in financial or banking “eco-systems”, and in ways to nurture and protect heterogeneity of organizational forms and business models within finance.

But how really heterogeneous are financial systems? How can we measure and understand such heterogeneity? These are the questions addressed in this session, from different perspectives and through different methodologies. The first perspective – the first issue – will be that of the relationship between a financial or banking system, characterized by a certain degree of cohesiveness or homogeneity, and the plurality of organizational forms within it. The paper by Butzbach and Romano will discuss this issue by proposing a novel statistical methodology to measure heterogeneity within the banking industry, through a longitudinal analysis of the Italian banking system. The paper by Kalam, on the other hand, will draw on a case study of micro-lending initiatives born in the United Kingdom but modeled after the Grameen bank.

The latter raises the issue of the multiple, competing logics at play within fields such as the financial system. This is the second issue addressed in this session: how do financial organizations come to terms with such logics? How do the institutions structuring banking and finance (regulations, competitive environment, governance arrangements) accommodate diversity? Building on the case study of an Indian micro-finance institutions, the paper by Amin will investigate the extent to which such organizations balance their social mission with financial pressures; and the possible combination of trust and control-based mechanisms on which micro-finance organizations base their governance.

The third perspective undertaken in this session is that of innovation: how and to what degree financial innovation can be related to the generation and the persistence of alternatives within financial systems? How may financial innovation lead to a re-configuration of the financial system’s institutional framework? These two questions are at the center of the paper by Bholat, who will look at the multiplicity of instruments and activities that are alternative to traditional financial instruments, and propose, in the process, new ways for thinking dynamically about the generation of alternatives within.

The fourth and final issue addressed in this session is that of sustainability or, more precisely, the impact heterogeneity may have on sustainability in the financial system, be it at the macro level (Bholat and Butzbach and Romano) or the micro level (Amin and Kalam).

1. Alternatives within an Isomorphic Field: Theorizing and Measuring Heterogeneity in Italian Banking, 1994-2012
Olivier Butzbach, Second University of Naples; Elvira Romano, Second University of Naples
3. Adaptability of the Grameen Model in the Context of the UK
Asif Aftab Kalam, Birkbeck, University of London