Governance of new product development and perceptions of responsible innovation in the financial sector: insights from an ethnographic case study

Abstract

We describe an ethnographic study within a global asset management company aimed at understanding the process and governance of new product development and perceptions of responsible innovation. We observed innovation to be incremental, with a clearly -structured stage gating model of governance involving numerous internal and external actors that was framed by regulation and co-ordinated by a small product development team. Responsible innovation was framed largely in terms of considering client needs when innovating and the understanding of operational, legal, regulatory and reputational risks. Staff perceived the company as having an inherently cautious culture, where the probability of bringing something destructive to market was perceived as being low. We conclude that the observed stage gating architecture offers considerable scope as a mechanism for systematic embedding of more broadly framed, emerging concepts of responsible innovation.Keywords: financial innovation; new product development; responsible innovation; governance; responsibility; stage gating 1. IntroductionIn this paper we investigate the process and governance of financial innovation and perceptions of responsible innovation in a global asset management company. This research sits within a broader goal to understand how theoretical concepts of responsible innovation emerging in science and technology studies and beyond (e.g., Owen et al, 2013;von Schomberg, 2013) might be framed and implemented in financial settings. To date there has been only little consideration of responsible innovation in finance (Armstrong et al, 2012;Muniesa and Lenglet, 2013) and almost no primary research.While the academic literature suggests some possible features of contemporary financial innovation, there have in fact been few documented accounts of either the process or governance of financial innovation in commercial organisations (Frame and White, 2004). We therefore elected to take a case study approach to our research. The paper is laid out as follows: We first briefly review the literature on financial innovation and its governance. We go on to describe in detail the process and governance of financial innovation in a global asset management company undertaking significant new product development. We then describe perceptions of responsible innovation in the company before finally discussing how established innovation governance approaches in this and other commercial organisations might be enlarged to embed a more broadlyframed responsible innovation approach. Financial Innovation and New Product DevelopmentInnovation in finance has a long history, at least as far back as 3000 BCE with the introduction in Mesopotamia of commodity money, early forms of banking, personal loans, interest and contingency claims (Allen and Gale, 1994;Goetzmann and Rouwenhorst, 2005;Allen and Yago, 2010). MacKenzie (2006) argues that financial innovation is a socio-technical phenomenon that has been shaped by modern economic theories of finance. Many authors (Llewellyn 1992;W...

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