Red Queen Effect in German Bank Industry: Implication of Banking Digitalization for Open Innovation Dynamics

Seungju Lee,Yona Kwon,Karoline Elm,Nam Nguyen Quoc,Cynthia Danon,Maren Mehler,Seungho Choi,Raphael Bauret

doi:10.3390/joitmc7010090

Seungju Lee, Yona Kwon + Show 6 more

Open Access

https://doi.org/10.3390/joitmc7010090

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Abstract

This study analyzed the firm’s actual case in an environment where the financial industry’s paradigm changes due to technological development. It focused on Deutsche Bank’s competitive action at the heart of the digitalizing European banking industry. This study presents the competitive dynamics among firms and the effects of such dynamics on firm performance. Based on the competitive dynamics between Deutsche Bank and other banks competing in the European banking industry, the Red Queen theory was applied. This study has shown that Deutsche Bank’s innovative actions in the digitalizing European banking industry are necessary and are a factor that can lead to successful firm performance in a hyper-competitive environment. Firms need to develop a capability to quickly capture the opportunities to innovate and take advantage of them to stay ahead of their competitors.

Highlights

Implication of Banking DigitalizationSince the external environmental conditions are rapidly changing, adapting to a new environment is critical for an organization to achieve its competitive advantage
This study examined the case of Deutsche Bank competing in the European banking industry under the transition to the digitalized banking system
By analyzing the competition process of Deutsch Bank, this paper provides deeper insights into the competitive dynamics in the European Banking industry

Summary

Introduction

Since the external environmental conditions are rapidly changing, adapting to a new environment is critical for an organization to achieve its competitive advantage. A sustainable competitive advantage is required to survive in a hyper-competitive environment where environmental conditions change fast. In line with this phenomenon, firms should adapt to the changing environment and actions of rivals. One of the ways to sustain competitive advantage is to observe the actions of market competitors. Firms learn how they adjust to the new environment [2,3]. If observing competitors’ actions helps sustain competitive advantage for a firm, would it be enough to observe their competitors and imitate their actions? If observing competitors’ actions helps sustain competitive advantage for a firm, would it be enough to observe their competitors and imitate their actions? How would the intensity of response to competitors’ actions in a market affect a firm’s performance?

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Conclusion