Service innovations of the banking industry in Taiwan: The perspective of reverse product cycle

Previous research has mostly focused on manufacturing industry to explore product and process innovation. Limited theoretical and empirical works have linked with service industry. And little research investigated the appropriate service innovations that influence firm performance in banking industry. Based on the theories of Reverse Product Cycle and innovation level, this study tentatively classified service innovations into four strategies including Steady Value-Added, Emerging Goals, Prosperous Business, and Satisfactory Efficiency. Through a postal survey of the publicly listed commercial banks in Taiwan, ultimately, 48 respondents (mostly CEO) returned the valid questionnaires (a response rate of 24%). By conducting cluster analysis, the strategies Steady Value-Added, Emerging Goals and Prosperous Business were successfully clarified. Specifically, the firms that aligned to Steady Value-Added Strategy have higher performance than those of Emerging Goals Strategy and Prosperous Business Strategy. The result showed that disruptive innovations are prevalent in Taiwan´s banking industry; however, the sustaining innovations have the higher impacts on firm performance than the disruptive innovations. The innovation strategies combined with customized services help commercial banks to accurately respond to customers´ demands and build sustainable competitive advantages. Managerial and policy implications from the research findings were provided in the conclusions.