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The Introduction of a Non-Traditional and Aggressive Approach to Banking: The Risks of Hubris

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Abstract

This study integrates institutional theory and social cognitive theory to describe how peripheral organizations can accidentally bring about radical change even in highly institutionalized and change-resistant fields. The empirical context is the field of banking in Ireland (1995–2001), where a peripheral bank triggered a shift away from traditionally conservative and risk-averse banking values toward aggressive values of entrepreneurial risk taking. The introduction of a new approach to banking was attributed to three factors: (1) a benevolent environment, which made this innovation feasible and timely, (2) the state of the field, which had gaps that could be addressed through specialization, and (3) prior successes, which created hubris in the senior managers, thereby increasing the pace and scope of adoption of this approach. Eventually, what started as a specialized and entrepreneurial approach led to the spread of a risky approach to banking across the entire field. The study highlights the risks of hubris, in that media praise and early successes can increase the pace of adoption of innovations which offer short-term gains but are detrimental in the long term.

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Authors and Affiliations

  1. Smurfit School of Business, University College, Dublin, Ireland

    Dena Y. Lawrence, Federica Pazzaglia & Karan Sonpar

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  1. Dena Y. Lawrence
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  2. Federica Pazzaglia
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  3. Karan Sonpar
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Correspondence to Karan Sonpar.

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Lawrence, D.Y., Pazzaglia, F. & Sonpar, K. The Introduction of a Non-Traditional and Aggressive Approach to Banking: The Risks of Hubris. J Bus Ethics 102, 401–420 (2011). https://doi.org/10.1007/s10551-011-0821-1

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