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The purpose of this paper is to examine the impact of online banking intensity on the financial performance of community banks.

This study estimates online banking intensity and bank performance indices using a combination of primary and secondary data. Online banking intensity is specified as a latent construct and estimated using web feature data collected from bank websites. An empirical profit function of a nonstandard Fourier flexible form is estimated using bank's financial data to derive a theoretically consistent performance measure. The actual impact of online banking on performance is measured by regressing the profit efficiency index against a number of correlates including online banking intensity measure.

Study results indicate that the increasing use of internet as an additional channel of marketing banking services has significantly improved the financial performance of community banks.

These results show that online banking improves the financial performance and should encourage community banks to adopt new information technologies and offer targeted online services.

This paper is the first of its kind that applies a structural equation modeling framework to develop a comprehensive online banking intensity measure, which accounts for a wide array of products and services offered online by a bank, and utilizes the estimated index in measuring the impact of internet banking intensity on bank performance.

A technological community framework can be used to explain and manage new medical technologies. It describes emergence, commercialization, and standardization of an innovation or technology within the context of its whole network (or community) of stakeholders. This framework is used to illustrate the emergence, commercialization, and standardization of a relatively new medical technology – umbilical cord blood (UCB) banking. Umbilical cord blood may prove to be a source of stem cells for bone marrow transplant that is safer, more accessible, and less expensive than current sources of stem cells. The technological community framework can signal potential problems as the technology emerges, and help healthcare delivery systems and providers to effectively assess and manage the technology. The framework can also be applied to other medical technologies and innovations.

With rising industry consolidation in the banking industry, it is unclear whether community banks may find more or less market opportunities. This paper aims to investigate how industry consolidation may affect community banks’ market share outcomes. The second goal of this paper is to establish the ways in which community banks may successfully manage market share growth goals that may be antithetical to the principles of being a local brand.

The empirical analysis is on the US banking industry, spanning the years from 1994 to 2018. This comprehensive panel data set includes county-year level granularity for more than 15,000 banks. Panel regression models that include bank-, county- and year-specific fixed effects are deployed.

It is found that local brands, operationalized as community banks in this study’s empirical context, are having the most success in consolidated market contexts. When pursuing market share growth, a distribution strategy to saturate a local market is found to be advantageous while expanding across geographies is less advisable for community banks.

The findings shed empirical light on the challenges and opportunities for community banks, thereby contributing to the banking industry literature and to an emerging stream of research on local brand management. By demonstrating the means of which growth can be successfully managed by local brands, the important and largely unanswered question of how a local brand can effectively grow is addressed.

We distinguish between two forms of local banks that build and maintain legitimacy in different ways: branches and unit banks. Branches gain legitimacy through the parent organization. Unit banks gain legitimacy through the personal reputation and social connections of the founders. Given the different ways in which legitimacy is built by these organizational forms, we think that the rural or urban nature of the community is likely to affect the founding rates of these two forms differently. Rural communities, in which personal and family relationships play an important role in both social and economic life, provide advantages to well-connected founders of unit banks. In these communities social networks serve as a demand buffer for unit banks, making the founding rate of this organizational form less sensitive to fluctuations in the demand for banking services in rural versus urban communities. In contrast, the founding rate of branches may not be greatly affected by the community context because branches gain legitimacy through a sponsoring organization whose legitimating characteristics are not local. Empirical analyses of foundings of local banks between 1976 and 1988 support these predictions. Supplemental empirical analyses also show no evidence of such buffering effect for unit retail establishments, which are expected to be less central in the social networks of rural communities than unit banks. Our results suggest that community organization channels resources to some kinds of organizations at the expense of others and that organizational research in general and organizational ecology in particular will benefit by paying more attention to community context.

This chapter discusses how one bank, committed to social innovation and investment in low-income communities, evolved into a model of socially responsible banking and exemplary community development financial institution. The authors draw lessons from this experience and propose ways to apply those lessons to other financial institutions.

The chapter is based on an in-depth case study of ShoreBank. It includes extensive interviews with two of the bank’s cofounders, who served as the bank’s leaders for more than 37 years.

The case study has identified six key enabling factors for social innovation: (1) a social purpose that is deeply, and effectively, embedded in the organization’s mission, strategy, and operations; (2) an ownership structure to support the social mission and a structure (e.g., bank holding company) that facilitates social innovation; (3) capital capacity – that is, ability to create credit through leverage; (4) a deep level of knowledge about the business, the clientele, and the operating environment; (5) talented people who bring both skill and passion for the mission to the institution-building process; and (6) the discipline to continuously innovate, at a scale appropriate to the problem, with resources that are adequate to the challenge.

This work has several limitations including a focus on one U.S. bank holding company, and based on interviews with that bank’s cofounders.

The chapter provides a rich description of how social innovation through social investment created a meaningful social impact. Important lessons and useful recommendations are drawn for social enterprises that are committed to social innovation in the financial services industry.

The chapter provides insights into the ShoreBank case based on a unique set of data. It offers useful recommendations for social enterprises.

As many businesses faced economic disruption due to the Covid-19 pandemic and sought financial relief, existing bank relationships became critical to getting a loan. This study examines factors associated with the development of personal relationships of rural small businesses with community bank representatives.

We applied a mixed-method approach. We employed descriptive statistics, principal factor analysis and logistic regression for data analysis. We distributed an online survey to rural small businesses in five states in the United States. Key informant interviews with community bank representatives supplemented the survey results.

A business owner’s trust in a banker was positively associated with the establishment of a business–bank relationship. However, an analysis of individual trust’s components revealed that the nature of trust is complex, and a failure of one or more components may lead to decreased trustworthiness in a banker. Small businesses that preferred personal communication with a bank were more inclined to relationship banking.

Due to the relatively small sample size and cross-sectional data, our results may not be conclusive but should be viewed as preliminary and as suggestions for future research. Bankers should be aware of the importance of trust for small business owners and of the actions that lead to increased trustworthiness.

The study extends the existing knowledge on the business–bank relationship by focusing mainly on social (instead of economic) factors associated with the establishment of the business–bank relationship in times of crisis and high uncertainty.

This chapter examines the transition in the US banking industry from a community to a national logic, developing a general model to explain how and when shifts in institutional logics occur. Based on qualitative historical evidence and discrete-time event history analysis predicting the introduction of legislation favoring the national logic, this chapter proposes that dramatic exogenous events such as the Great Depression or more gradual processes such as modernization favored the industry's transition to the national logic, but that such exogenous events had a greater influence in areas where strategic actors could capitalize on them. The qualitative evidence presented here suggests that struggles involving organizational identity and “legitimacy politics” played an important role in the shift in logics. Our theorizing focuses on how, when the environment changes in an incremental fashion, actors are primed with new possibilities, which may shift their collective identities, but when environmental changes are discontinuous, they provide actors strategic opportunities to alter the balance of logics in the environment.

Community banks continue to offer important financial services including agricultural and small-business lending as well as residential mortgage origination. Because community banks’ share of available source funds may be threatened in rural markets due to competing larger banks seeking less expensive core deposits, this study examines whether large-bank competition, market share of deposits and changing market share impact the profitability of rural, small community banks.

Using a Heckman-type selection model to control for sample selection bias, ordinary least squares (OLS) regression analysis with time and bank fixed effects is conducted to study the drivers of profitability in small, community banks that operate exclusively in rural markets. Profit drivers for rural, small community banks of particular interest in the study are larger-bank competition, market share of deposits and year-to-year change in market share of deposits.

The research indicates that rural, small community bank profitability decreases in concurrent market share of deposits and may increase in changing market share but that the presence of a larger competitor decreases the profitability of small community banks in rural markets as larger banks compete for deposits in these markets. The paper also finds that increased Internet access in rural markets accompanies lower performance for small community banks, indicating that online banking services may threaten rural, small community banks.

This paper offers new findings to the literature on the performance effects of large competitors in rural banking markets. The results suggest implications for managers of rural, small community banks and offer additional knowledge about profit drivers of rural, small community banks of which regulators should be cognizant.

Recent institutional scholarship has discovered new possibilities for change in both the accumulation of incremental transformations and in the skillful action, institutional work, and creative activities of political and institutional entrepreneurs. Lurking behind stability and change lie actors who can act reflexively within and with existing institutions, and who do so on a routine, rather than exceptional basis, redeploying, recombining, and transposing extant systems to solve problems of identity and control. This paper probes the potentials and limits of those possibilities – and the prospects for reform in American banking – via a case study of the Bank of North Dakota and efforts to transpose its hybrid model of state and community logics into other states. The analysis first finds a full range of institutional labors and skillful activities emphasized by recent work as the foundation for transposition. It finds crisis; the presence of multiple logics; the mobilization of boundary spanning networks; the use of conferences and theorization to sustain independent discourse and collective identities; skillful framing; and substantial editing and recombination to fit the model with receiving states’ institutions. It then juxtaposes these conditions with outcomes in the states, developing some implications for actor-centered institutionalisms, current preoccupations with mechanisms, and state-level strategies for financial reform.

Despite recent advances, neither organizational studies nor the scholarship on economic resilience has systematically addressed how the ecologies of organizations that populate local economies can serve as infrastructures for responding proactively to economic shocks. Using county-level data, this study analyzes relationships between the prevalence of organizational alternatives to shareholder value-oriented (SVO) corporations within a particular locality and its unemployment levels during and after the Great Recession. The results support the hypothesis that the presence of such alternative organizations can enhance the capacities of local economies to resist and recover from recession shocks. Cooperative, municipal, and community-based enterprises, research universities, and nonprofits more generally were associated with greater resistance to the recession shock and stronger recoveries – specifically, lower surges in unemployment rates from 2007 to 2010 and greater reductions in unemployment rates from 2010 to 2016. By contrast, SVO corporations were associated with greater surges in unemployment and perhaps weaker recoveries. Providing a proof of concept, this study opens up new lines of inquiry for organizational studies by linking organizational ecologies to the promotion of collective efficacy and a more broadly shared prosperity in economic life.