The role of flexibility and complexity in response to regulatory change: A case study of innovation in a major Danish financial institution

Abstract

The link between regulations and innovation is puzzling. Some studies point to higher innovation performance as an effect of regulation, whereas other researchers disagree. A literature review shows empirical inquiries into various industries, with the financial sector attracting significant attention. The review also points to a company’s responses’ flexibility and complexity as variables mediating the relationship between regulation and innovation performance. These variables remain underexplored as empirical objects of analysis on a company level in the financial sector. By applying a case study research strategy, 100 launched financial service innovations’ performance is compared with qualitative data assessing flexibility and complexity in the project work, leading to the launch of these products into the marketplace by a major Danish financial company. Finally, these data are quantitatively tested with a multinomial logit model. The results contribute to the differing views on how regulations influence innovation by showing links between high flexibility and low complexity in firm response for improved innovation performance. Increased complexity, in turn, impedes performance. Hence, specific innovation efforts from management are critical for striking the right balance between flexibility and complexity to achieve success in connection with regulatory changes.

Systematic review of institutional innovation literature: towards a multi-level management model

“…Institutional ownership (Cooke and Saini 2010 ; Yi et al 2017 ; Rong et al 2017 ; Asiedu et al 2020 ; Bennett and Nikolaev 2020 ; Kang and Jiang 2020 ; Li et al 2020 ; Afshari-Mofrad et al 2021 ; Sharma and Sharma 2021 ; Bentzen et al 2021 ; Godlewska 2021 ; Hussen and Çokgezen 2021 )…”

“…Although researchers agree on the importance of high performing and pro-innovation institutions, the spotlight on quality and control determinants tend to vary. Measuring efficacy and changeability offers the main interest for some researchers (Bennett and Nikolaev 2020 ; Afshari-Mofrad et al 2021 ), while others analyse factors related to innovation performance (Asiedu et al 2020 ; Bentzen et al 2021 ; Godlewska 2021 ) or the performance of institutional entities such as firms (Li et al 2020 ; Hussen and Çokgezen 2021 ), and universities (Sharma and Sharma 2021 ). The latter interest informs the use of analytical constructs like the quadruple helix, which add a layer of network control for engagement (Schütz et al 2018 ; Kang and Jiang 2020 ).…”

“…2017;Asiedu et al 2020; Bennett and Nikolaev 2020;Kang and Jiang 2020;Afshari-Mofrad et al 2021;Sharma and Sharma 2021;Bentzen et al 2021;Godlewska 2021;Hussen and Çokgezen 2021) …”

Are all cats grey in the dark? calling for a new taxonomy of internationalizing SMEs

“…It includes the number of foreign markets, its export turnover, its internationally acknowledged image, the international experience of its staff, and its established capacity to cope with international risks (e.g. foreign exchange, nonpayment risks), and its ability/capacity to adjust to internal/external changes (Houman Andersen & Laursen, 2021; Bentzen et al, 2021). For example, past experiences may positively influence (Love et al, 2016) a firm's export intensity.…”

“…Analysis of literature pertaining to internationalizing SMEs suggests they rely on various theoretical approaches, directly or indirectly related to IB, ranging from incremental development to network positionings, encompassing, among others, the theoretical lenses of RBV (Peng, 2001), dedicating to international performance (Dhanaraj and Beamish, 2003). In addition, we integrate the KBV and its integrative approach (Young et al, 2000), not overlooking the IBV and neo-institutional theories (Buckley and Lessard, 2005), as far as regulations and public and private supports are concerned (Ahmed and Brennan, 2019; Peng et al, 2008).…”