Urban Commercial Bank's Ambidexterity Creation Under Digitalization

Recently,Internet Finance has brought deep changes to the banking industry.It causes negative effects on incumbent banks' assets and liabilities businesses,and in the mean time provides new dynamism to intermediary business.Faced with both threats and opportunities,banks need to survive and thrive based on their capability to exploit and explore technologies and markets,which is known as the "ambidexterity dilemma."Large commercial banks are developing Internet Finance through exploring big data,cloud computing and open banking.Unlike large state-owned banks and national joint-stock banks,urban commercial banks(UCB)form a special part of Chinese financial industry.Although they are lagging behind in IT construction,they have the advantage of being open to inter-organizational cooperation and having flexible decision-making mechanism.Therefore,it is vital to study how UCBs create ambidexterity when faced with fierce competition coming from large banks and Internet companies.However,on one hand,current banking studies have less focus on small and medium-sized banks,on the other,literature on ambidexterity mainly discuss ICT or media industry,which have undergone thorough transformation because of Internet.Few studies apply ambidexterity theory to the banking industry as it has strong legacy and is hard to be transformed.Therefore,this paper studies ambidexterity creation of UCBs under digitalization,and adopts the inter-organizational perspective for the first time.We explore UCB's digital innovation from 4 aspects:innovation portfolio,organization boundary,IT program group planning and IT project governance.Due to the explorative nature of this study,we use qualitative methods such as multi-case study,in-depth interview and grounded theory.Data triangulation is used to improve data reliability and validity.We choose 3 UCBs representing large,medium and small UCBs,and select 14 IT projects from them as sub-cases.We interviewed Head of bank,Head of department and senior employees from each bank to collect primary data.Finally,we apply coding methodology to the data and build the theoretical model for UCB's ambidexterity creation under digitalization from inter-organizational perspective.The results are as follows:an ambidextrous UCB is structurally and contextually ambidextrous.Structural ambidexterity is about innovation portfolio and organization boundary.Based on the primary data collected and Kaulio et al.'s(2017)double ambidexterity matrix,this paper discusses structural ambidexterity from 4 aspects:(1)incremental exploitation,(2)radical exploitation,(3)incremental exploration,(4)radical exploration.Contextual ambidexterity is about IT program planning at organizational level,and IT project governance at project level.It is analyzed from 3 aspects:(1)integrating mechainisms,(2)balancing mechanisms,(3)switching mechanisms.To be specific,structural ambidexterity includes the following elements:(1)UCB conducts incremental exploitation internally as it is small scale and technically feasible;(2)UCB forms weak ties with radical exploitation partners in the form of building APIs or purchasing their products/services;(3)UCBs form strong ties with incremental exploration partners only at the level of project implementation;(4)UCBs form very strong ties with radical exploration partners at the level of both strategizing and implementation.Contextual ambidexterity includes the following elements:(1)employees integrate exploitation and exploration through forming different ties with different innovation partners,following formal processes,and engaging in formal and informal trainings;(2)employees balance the tension between technology and operation by using the MVP(mminimal viable product)principle and dividing projects into several terms.It's necessary for them to identify the bank's value chain and establish communication mechanism with their partners;(3)employees switch from different incremental exploration projects by following the timetable of the whole IT program,and switch from radical to incremental,exploration to exploitation by cooperating with external partners on platform building,and conducting iteration based on the transferred knowledge.Switching mechanisms can push forward UCB s exploration boundary.Finally,this paper provides practical advices to UCBs from technical,operational and managerial perspectives,based on the results of multi-case study and literature review.