MANAGING DISRUPTIVE TECHNOLOGY — INTERNET BANKING VENTURES FOR TRADITIONAL BANKS

Abstract

This study examines the perception of the nature of technological change for Internet Banking by proposing and testing a model of the strategic management of online banking by traditional banks. Specifically, this empirical study uses a stratified sample of the FDIC database to address how perception of the technology and the environmental context (knowledge of cause-effect relations and crystallized outcome standards) impact internal and external constituency relationships (including social norms, staffing, and technology) and therefore the type of strategic control systems employed (input, output, and behavioral control systems). From a survey of 103 banking unit managers (both Internet and traditional branches) from 65 different banks, the study revealed that Internet banking showed a greater connection to external norms and values and a reduced connection to internal (corporate) technology compared to traditional banking. Further, degree and speed of disruptiveness had the opposite effect on crystallized standards, while both were associated with a greater utilization of input control systems. Clearly, uncertainty and rapidness of technological change have different impacts upon environmental perception and strategic management decisions. The study has important implications for bank managers pursuing the development of Internet Banking.

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