Competition and cooperation in the Illinois banking industry

Abstract

The primary goal of this research is to assess the ways in which rival organizations interact. It is argued that they will generally cooperate as well as compete with each other as they attempt to manage their interdependence. A dilemma of the commons is used as a metaphor to describe the nature of these inter-organizational interactions. Factors that may predispose organizations to being interdependent are considered. These draw primarily on insights from psychology (beliefs regarding future changes), organizational theory (patterns of dependence on suppliers and buyers), and economics (resource configurations as well as geographic spatial competition). Since data associated with these theoretical insights typically are addressed at different levels of analysis, a hybrid methodology is developed to facilitate the combination of these data in a single analysis--a QAP canonical correlation. Three models of multi-point geographic spatial competition are also proposed. Empirical findings indicate that rivals do indeed exhibit a mixture of cooperation and competition. As far as banking in Illinois is concerned, it appears that the geographic fragmentation of the industry virtually nullifies the impact that might be expected due to similarities in resources, target markets, or strategic beliefs. It is also demonstrated that the innovative method of combining these factors does provide a richer set of insights than those provided by the methods (the so-called canned statistical packages) that are currently available in the market. Since this style of interdisciplinary research does not conform to the constraints of any one of the contributing paradigms, it is difficult to discuss the theoretical and methodological contributions of this work. To that end, additional analytic models are also presented. These serve as vehicles for the discussion of both theoretical and methodological issues related to this style of interdisciplinary research.