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Title: On Network Competition and Solow Paradox: Evidence from the U.S. Banks
Authors: Ho,Shirley J.;MALLICK,SUSHANTA K.
Contributors: 政大經濟系
Date: 2008-08
Issue Date: 2013-09-17 15:54:03 (UTC+8)
Abstract: In this paper we develop a model to examine the effect of information technology (IT) in the banking industry. IT can reduce operational cost and create network externality. Empirical studies, however, have shown inconsistency, the so-called Solow paradox, which we explain by stressing the heterogeneity in banking services. In a differentiated model, we characterize the conditions to identify these two effects and explain how the two seemingly positive effects turn negative. Using a panel data set of 68 US banks over 1986–2005, our results show that the profitability effect of IT spending is negative, reflecting a negative network competition effect in the banking industry.
Relation: The Manchester School, 76(1), 37-57
Data Type: article
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