Shabahat Ali, Weiwei Wu and Sadaqat Ali
Building upon the firm market orientation theories, this study aims to examine the individual and synergistic effects of the firm inside-out and outside-in marketing capability on…
Abstract
Purpose
Building upon the firm market orientation theories, this study aims to examine the individual and synergistic effects of the firm inside-out and outside-in marketing capability on its incremental and radical product innovation outcomes.
Design/methodology/approach
By collecting cross-sectional data from 203 manufacturing firms in Pakistan, confirmatory factor analysis in AMOS and hierarchical multiple regression analysis in SPSS are performed to validate the study measurement models and test the hypothesized relationships, respectively.
Findings
The findings of this study suggest both inside-out and outside-in marketing capability critical for incremental and radical product innovation. Specifically, inside-out marketing capability is found positively associated with incremental product innovation and non-linearly (inverted U-shaped) associated with radical product innovation. Conversely, outside-in marketing capability is found positively associated with radical product innovation but non-linearly (inverted U-shaped) associated with incremental product innovation. However, the results indorse that developing synergy between the inside-out and outside-in marketing capability positively impacts both incremental and radical product innovation.
Originality/value
Drawing from the firm inside-out and outside-in market orientation theories, the study extends the existing research on product innovation outcomes from the marketing capabilities perspective. Previous literature highly recognized the value of the firm market orientation and being market-driven in market-based product innovations. However, there was a lack of understanding of how the firm marketing capabilities facilitate incremental and radical product innovation. This study provides a novel understanding of the firm inside-out and outside-in marketing capability role in inducing incremental and radical product innovation which enrich and extend the current literature on firm capabilities and product innovations from a marketing perspective.
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Shabahat Ali, Weiwei Wu and Sadaqat Ali
This study aims to offer and validate an integrated marketing capability-product innovations framework. Particularly, it aims to examine the role of adaptive marketing capability…
Abstract
Purpose
This study aims to offer and validate an integrated marketing capability-product innovations framework. Particularly, it aims to examine the role of adaptive marketing capability in enabling market ambidexterity and incremental as well as radical product innovation. Also it intends to investigate the moderating role of transformational leadership between adaptive marketing capability and market ambidexterity.
Design/methodology/approach
Manufacturing firms in Pakistan, an emerging economy, are taken as the context for this study. A designed survey questionnaire is used for data collection. Partial least square technique is employed to empirically validate and test the hypothesized model with a sample of 192 manufacturing firms. Particularly, the two-stage approach in SmartPLS is used to validate measurement models, and structural equation modeling technique is used to test the proposed hypothesis.
Findings
The findings not only confirm that adaptive marketing capability is instrumental to both incremental and radical product innovations but also reveal that adaptive marketing capability serves an important antecedent to market ambidexterity shedding new lights on its mediating role in the relationship of adaptive marketing capability with incremental and radical product innovations. Moreover, the results find that the effectiveness of adaptive marketing capability to support market ambidexterity may involve a possible trade-off between exploitation and exploration when the leaders exhibit a low or high level of transformational leadership behavior.
Originality/value
This study contributes to outside-in strategic perspective and contextual ambidexterity literature by revealing the role of adaptive marketing capability as an important enabler of market ambidexterity which, in turn, allows the firm to simultaneously introduce incremental and radical product innovations. In this way, this study advances the current understanding of the antecedents and consequences of contextual ambidexterity. Also, this study provides insight into the types of capabilities needed for the firm's contextual and employees' behavioral adaptation to simultaneously manage exploitation and exploration within the same business unit which was lacking in the previous literature. Further, this study also offers a novel understanding of the conditional role of transformational leadership between adaptive marketing capability and market ambidexterity.
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Mahnoor Anjum Butt, Huma Ayub, Bilal Latif, Fawad Asif, Malik Shahzad Shabbir and Ammar Aftab Raja
The purpose of this paper is to shed light on the reputational risk, which is elusive and difficult to measure due to the lack of its conclusive definition. Literature supports…
Abstract
Purpose
The purpose of this paper is to shed light on the reputational risk, which is elusive and difficult to measure due to the lack of its conclusive definition. Literature supports the notion that financial risks may translate into reputational risks that pose threat to bank performance. However, empirical investigations in this context are still at their nascent stage.
Design/methodology/approach
This study has used a panel dataset for the sample of 24 conventional and Islamic banks regarding the period 2007–2017 by using a structural equation model.
Findings
The results of this study show that reputational risk partially mediates the relationship between financial risks and the performance of conventional banks. However, for Islamic banks, the reputational risk remains insignificant as a mediator. This study provides significant implications to risk managers in banks, regulators and academics to understand the role of reputational risk linked to financial risks for the improvement of bank performance.
Originality/value
This study aims to add to the literature by measuring reputational risk through the shareholders reputational score index, which is used as a mediator to determine whether financial risks of banks affect the performance of conventional and Islamic banks in Pakistan.
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Syed Ali Raza, Rehan Ahmed, Muhammad Ali and Muhammad Asif Qureshi
The role of insurance is a backbone for consumers to secure their future. It is important to know where to invest and what are the benefits. Therefore, for the Muslim segment…
Abstract
Purpose
The role of insurance is a backbone for consumers to secure their future. It is important to know where to invest and what are the benefits. Therefore, for the Muslim segment, Islamic insurance system provides Riba (interest)-free environment where consumers invest their money and recover their losses according to sharia. This paper aims to examine the determinants that influence purchase intention of consumers toward Islamic insurance (Takaful) adoption in Pakistan with the help of the modified theory of planned behavior (TPB).
Design/methodology/approach
The authors added four specific variables related to Islamic sharia compliance in the conventional form of the TPB. The relationship among the variables is assessed by using partial least squares structural equation modeling, while the data are collected from 305 respondents.
Findings
The results suggest that attitude, subjective norm and perceived behavioral control are strong predictors of an Islamic insurance adoption in Pakistan. Moreover, factors such as compatibility, relative advantage and awareness have positive and significant impacts on takaful participation. A negative but insignificant relation is found between perceived risk and intention.
Practical implications
This paper provides insight for understanding the factors that lead to consumers' purchase intention of Islamic insurance.
Originality/value
This paper makes a unique contribution to the literature with reference to Pakistan, being a pioneering attempt to investigate the factors of Islamic insurance adoption by modifying the TPB and applying more rigorous statistical techniques like confirmatory factor analysis (CFA) and partial least square structural equation modeling.
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Muhammad Iqbal, Lukmanul Hakim and Muhammad Abdul Aziz
This study aims to analyze the factors that influenced the stability of Islamic banks in Asia.
Abstract
Purpose
This study aims to analyze the factors that influenced the stability of Islamic banks in Asia.
Design/methodology/approach
The panel data consisted of 16 Asian countries operating Islamic banks from 2010 to 2019. The data were analyzed through dynamic panel regression using Arellano–Bond generalized method of moments (GMM).
Findings
This study provides novel insights into the factors influencing the stability of Islamic banks in Asia. The findings suggest that past financial stability, liquidity risk, loan risk, inflation, gross domestic product, government effectiveness, rule of law and control of corruption are all significant contributors to Islamic bank stability. Notably, political stability, voice and accountability and regulatory quality did not show a significant association.
Research limitations/implications
The current study’s focus was solely on Islamic bank stability in Asian countries, which leaves room for further exploration. Future research could benefit from expanding the scope to encompass all nations with active Islamic banking institutions. In addition, incorporating a broader range of macroeconomic variables, such as exchange rates, interest rates, profit-sharing equivalents and investment rates, could provide deeper insights into the factors influencing Islamic bank stability across diverse contexts.
Practical implications
This study has significant practical implications for policymakers, bank managers and regulatory authorities seeking to enhance the stability of Islamic banks in Asia. By implementing robust risk management frameworks, adopting prudent regulatory policies, and actively fostering economic growth, policymakers can create an environment conducive to the sustained development and prosperity of Islamic banking institutions. Notably, promoting good governance practices and instituting effective crisis prevention measures can further bolster the resilience of the Islamic banking sector, enabling it to play a more dynamic role in contributing to the overall development and welfare of Asian societies.
Social implications
The findings of this study carry significant social implications, highlighting the need for governments in Asian countries to prioritize public policies that promote good governance and ethical practices within the banking industry. Such policies, coupled with efforts to attract foreign investments and foster a stable and transparent banking sector, have the potential to generate far-reaching positive effects on society. Through economic growth stimulated by a robust Islamic banking sector, Asian countries can create new employment opportunities, improve living standards and ultimately enhance the overall well-being of their citizens.
Originality/value
This study contributes to the ongoing discourse on Islamic banking stability by offering novel insights and expanding the empirical knowledge base in this field. The dual application of robust regression methodologies – namely, GMM dynamic panel data models – presents a unique analytical framework for investigating the complex interplay between diverse variables and Islamic bank stability. This methodological choice fosters deeper understanding of the dynamic relationships at play, advancing our understanding of how specific factors influence the sector's resilience and performance. In addition, the study uses rigorous empirical techniques and engages with the extant literature to provide fresh perspectives and nuanced interpretations of the findings, further solidifying its contribution to the field's originality and richness.
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Ameni Ghenimi, Hasna Chaibi and Mohamed Ali Brahim Omri
This paper aims to identify and analyze the similarities and differences of the liquidity risk determinants within conventional and Islamic banks.
Abstract
Purpose
This paper aims to identify and analyze the similarities and differences of the liquidity risk determinants within conventional and Islamic banks.
Design/methodology/approach
This study uses a dynamic panel data approach to examine the relationship between liquidity risk and a set of bank-specific and macroeconomic factors during 2005–2015, by selecting 27 Islamic banks and 49 conventional ones operating in the MENA region. More specifically, the dynamic two-step generalized method of moment estimator technique introduced by Arellano and Bond (1991) is applied.
Findings
The results suggest that the set of bank-specific variables influences the liquidity risk of both banking systems, while macroeconomic factors determine the liquidity risk of conventional banks. Islamic banks are not affected by macroeconomic determinants.
Practical implications
The research facilitates to the academicians, practitioners and bankers to have an alluded picture about liquidity risk determinants and their management. The findings can be used by bankers’ policy decision-makers to improve and enhance their consideration for liquidity risk management in both banking systems. Indeed, the study makes them aware to manage liquidity risk differently between conventional and Islamic banks, as the results reveal different liquidity risk determinants.
Originality/value
Compared to the abundant studies on the determinants of credit risk, researchers have not sufficiently addressed the factors influencing liquidity risk. Moreover, none of these few research studies has discussed and compared liquidity risk determinants within both banking systems operating in the Middle East and North Africa (MENA) region. This leads us to identify the similarities and differences between conventional and Islamic banks in the MENA region in respect of systematic and unsystematic determinants of the liquidity risk. The value is attributed to the increasing differentiation between Islamic and conventional banks. Islamic banks are characterized with a different liquidity structure distinguishing them from their conventional counterparts.
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Sutan Emir Hidayat, Muhammad Rizky Prima Sakti and Raqiya Ali Abdullah Al-Balushi
The purpose of this study is to critically evaluate how conventional and Islamic banks trade off risk, efficiency and financial performance in their business models, to…
Abstract
Purpose
The purpose of this study is to critically evaluate how conventional and Islamic banks trade off risk, efficiency and financial performance in their business models, to investigate how patterns of risk and efficiency vary between conventional and Islamic banks and to critically evaluate how the profitability of conventional and Islamic banks varies following the financial crisis.
Design/methodology/approach
This study uses univariate and multivariate statistical techniques by investigating 12 Islamic banks and 34 conventional banks operating in the Gulf Cooperation Council (GCC) region has been studied over the period 2011–2018.
Findings
The results suggest that Islamic and conventional banks differ not in the levels of efficiency, risk and profitability, but rather in how risk and efficiency influence banks’ financial performance. Islamic banks are found to be less influenced by the adverse effects of credit risk, which is consistent with the risk-sharing nature of Islamic financing. However, the results only hold for return on assets (ROA) and return on equity (ROE) while the net interest margin is observed to be negatively influenced by credit risk. Lower cost-income efficiency is also found to boost ROA and ROE of Islamic banks which could be attributed to a larger share of non-interest revenues due to Sharīʿah-compliance.
Research limitations/implications
From a theoretical point of view, this study helps to understand the risk, efficiency and financial performance of Islamic banks in comparison with conventional banks.
Practical implications
The results of this study can serve bank managers, regulators and shareholders. Policymakers should encourage a more risk-sharing structure of Islamic financing as it brings less adverse effects of credit risk and increases income sustainability for Islamic banks. The present study may help bank managers to improve the financial performance of their firms by controlling risk and efficiency. The study results also have implications for shareholders and depositors of Islamic and conventional banks as they should have a predetermined position about the level of credit risk and efficiency in each banking system.
Originality/value
The foremost contribution is that this is one of the few studies to compare risk, efficiency and financial performance of Islamic and conventional banks in the GCC region. By using the latest data, this paper hopes that the findings will be more relevant than previous studies to the current situation of the banking industry in the region.
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The purpose of this paper is to empirically assess the impact of the principle of profit- and loss-sharing (PLS) on the exposure to liquidity risk of Islamic banks in Gulf…
Abstract
Purpose
The purpose of this paper is to empirically assess the impact of the principle of profit- and loss-sharing (PLS) on the exposure to liquidity risk of Islamic banks in Gulf Corporation Council (GCC) countries. The Islamic bank activity is distinguished by a PLS principle, which is likely to involve specificities in the bank liquidity issue.
Design/methodology/approach
This paper investigates the determinants of Islamic bank liquidity over the period 2005–2016 using a panel of 23 Islamic banks in GCC. The system of generalized method of moment estimators is applied.
Findings
The findings reveal that while profit-sharing investment accounts (PSIAs) are inversely proportional to Islamic bank liquidity, the PLS investment does not seem to act as a determinant of the bank liquidity. The fact that PSIAs are globally short-run accounts, but finance long-run projects leads to a substantial maturity mismatches, which limits the availability of liquidity buffer and exacerbates the bank’s exposure to liquidity risk. Moreover, capital adequacy ratio has significant and positive association with bank liquidity, as a strong capital ratio helps to strengthen the liquidity control. However, return on assets has a negative significant impact on bank liquidity. For instance, if the bank holds more cash, it deprives itself from placing funds and earning returns, which causes its profitability to decline.
Practical implications
This paper gives further insights to better improve the liquidity risk management in a context of scarcity of Shariah-compliant instruments. Islamic bank needs to determine the PLS purpose and goals to be consistent with the “bank’s financing policy” and convince its depositors to use their deposits for medium and long-run investments.
Originality/value
Unlike previous empirical research, this investigation tries to better grasp the Islamic bank liquidity issue by focusing on the PLS impact on liquidity risk. It aims to fill in the gap in the empirical literature on this topic.
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Omar Masood and Muhammad Ashraf
The purpose of this paper is to inspect whether bank‐specific and macro‐economic determinants influence Islamic banks' profitability in the selected countries of different regions.
Abstract
Purpose
The purpose of this paper is to inspect whether bank‐specific and macro‐economic determinants influence Islamic banks' profitability in the selected countries of different regions.
Design/methodology/approach
In order to achieve the study objective and to answer the question, the balanced panel data regression model has been used. Bank level data is used and this study examines the alternative measures ROA and ROE as a bank‐specific function and macro‐economic determinants.
Findings
The study results signify that banks with larger assets size and with efficient management lead to greater return on assets.
Originality/value
The paper shows that management efficiency regarding operating expenses positively and significantly affects the banks' profitability.
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Sedigheh Moghavvemi, Su Teng Lee and Siew Peng Lee
Foreign and local banks in Malaysia are competing in terms of skilled staff, innovative products and services, rendering quality services and customer satisfaction. The purpose of…
Abstract
Purpose
Foreign and local banks in Malaysia are competing in terms of skilled staff, innovative products and services, rendering quality services and customer satisfaction. The purpose of this paper is to examine the overall service quality and customer satisfaction of both foreign and local banks.
Design/methodology/approach
The data used to test the hypothesis were collected from 748 foreign and local bank customers in Malaysia. The research model was analysed using a structural equation modelling technique.
Findings
Results show that knowledge and staff competencies, as well as convenience of the bank is more significant for local bank customers while bank image and internet banking are important components for foreign bank customers. The results also reveal that foreign bank customers have higher satisfaction as compared to local bank customers.
Research limitations/implications
No analysis is undertaken of any difference in the service quality dimensions between banks of different size. Further research on banking services could usefully test services quality dimensions across banks of different sizes.
Practical implications
The findings serve as a valuable reference for local banks understand service quality challenges they may face from foreign banks in this competitive industry. Findings suggest that, to provide high-quality services, financial institutions need to heighten customer satisfaction differentiation strategies.
Originality/value
The outcomes of this study enhance the knowledge on the performance of both local and foreign banks in Malaysia as well as customer satisfaction, which are invaluable to all bank managers and industry players in improving their services.