Banking technology, technological learning and competition: comparative case studies in Thai banking

Innovation: Management, Policy, & Practice, Oct, 2005 by Jarunee Wonglimpiyarat

SUMMARY

This paper focuses on the five major commercial banks in Thailand (Bangkok Bank, Siam Commercial Bank, Thai Farmers Bank (Kasikorn Bank), Krung Thai Bank and Bank of Ayudhya) with regard to strategies in competition in the banking industry. The paper analyses strategy and the adoption of technology against progress of the banking economy. Over the past few decades, the Thai banking structure has changed from mass automation towards smart automation. Improvements in information and communications technology enable the banking community to launch new types of financial services like electronic banking services and mobile banking services. The study explores the ways the banks improve their technological capabilities (their technological learning process to improve the technological capabilities) and the use of technology strategy in the banking sector. The results show that technological innovation in the banking sector of Thailand is not revolutionary but evolutionary.

KEYWORDS

technological learning; technological change; evolutionary changes; mass automation; smart automation; banking case studies; Thailand banking

1. INTRODUCTION

Changes in technology have expanded the scope of operation, competition and the use of strategy in the competitive marketplace. Thai banking has been increasingly challenged by a high degree of IT adoption since IT plays an important role in improving the performance of the banking business. This paper is focused on studying the technological capabilities of Thai banking and the learning process to accumulate technological capabilities. The study will use the case of Thai banking to test the concepts of technological learning and the technological regime of Buzzacchi et al. (1993). (The definition of 'technological regimes' according to Buzzacchi et al. is in Section 2.3.) As most studies of technological change have been concerned with the manufacturing sector, and few with service organisations, this study's focus on the banking sector would address a gap in the services area.

The study uses a case study methodology to examine the technological capabilities of Thai banking. The case studies of Thai banks (banking in a developing country) are used to test the model of Buzzacchi et al., arguing that there is a weak evolutionary link between the mass automation and smart automation regimes causing the stock of knowledge and skills used in the first to be unusable in the subsequent regime. Following the introductory section, Section 2 reviews the concepts of learning and technological change including a critical examination of Buzzacchi et al.'s model. The theoretical framework on technological accumulation leading to capabilities provides a basis for the analysis and evaluation in Section 4. Section 3 provides an overview of Thai banking as a background for understanding the process of creating technological capabilities in Thai banks. Section 4 presents the analysis of findings of 5 major commercial banks--the Bangkok Bank (BBL), the Krung Thai Bank (KTB), the Thai Farmers Bank (Kasikorn Bank--TFB), the Siam Commercial Bank (SCB) and the Bank of Ayudhya (BAY). The conclusion section draws together the theoretical issues and empirical findings on learning for technological capabilities. Possible avenues for further research on innovation management are suggested.

2. THEORETICAL FRAMEWORK

2.1 Conceptualising technological learning process

In the literature concerned with the concepts of technological learning, Cohen and Levinthal (1990); Amsden and Hikino (1993) view learning as the acquisition of knowledge from outside sources. Adler and Clark (1991) and Bessant and Buckingham (1993) view learning as any activity leading to incremental improvement (learning curve improvement). According to Rosenberg (1982), Malerba (1992) and Von Hippel and Tyre (1995), the concept of learning is defined as an integrated process of knowledge acquisition which ultimately enhances the stock of knowledge. However, the concept of learning argued by Dosi and Freeman (1994) is broad since it covers any type of technical change plus the acquisition of any type of knowledge. In this study, the third concept will be used since it shows how the learning process enhances the stock of knowledge.

Bell and Scott-Kemmis (1985) argue that the process of technological learning concerns the mechanisms and processes which bring about changes in the innovation system. The concept of learning put forward by Lall (1982) comprises the elementary, intermediate, and advanced forms. Elementary learning includes basic learning like learning by doing (Arrow 1962; Von Hippel and Tyre 1995). Intermediate learning includes processes undertaken to achieve incremental adaptations and improvements, like learning by training. Lall refers to advanced learning as the skills and know-how required for carrying out major technological adaptations in both product and process technology, like learning by searching (Nelson and Winter 1982; Bell 1984; Dosi 1988). Nevertheless, there are problems in classifying the degree of increased improvement which some scholars, like Freeman and Perez (1988), have tried to do (a taxonomy of innovations).