Presentation Details

The Fourth International Conference on Knowledge, Culture and Change in Organisations

The Effects of Cultural Rigidity on Bank Geographic Diversification

John J. Voyer, Herbert Smoluk, Bruce Andrews.

In 1997 the Riegle-Neal Interstate Banking and Branching Efficiency Act went into effect, opening up the arena for banks wishing to operate across state lines. Using system dynamics methods, we examined how this change was incorporated into the cognitive map of a large regional bank holding company, and tested some of the resulting implications for the bank’s strategy of geographic diversification. One surprising finding was the degree to which cultural predispositions constrained the bank’s strategy. These included a strong desire for control, a strong preference for expanding operations only to contiguous states, acquiring only those smaller banks that fit its culture, steadfastly clinging to a community bank image, and expanding only within its home region. Using a system dynamics model, we tested five possible, but not mutually exclusive, strategies that the bank might have pursued: 1) maintain its current size and improve management control of existing operations and subsidiaries; 2) expand within its broad geographic region, but let go of a cultural preference for contiguous-state operations; 3) expand within its region and consider out-of-state acquisitions with a less than perfect cultural match; 4) expand within its region and abandon its long-held image as a community bank; and 5) expand outside of its home region. Our testing revealed that the last of these strategies would have had the most beneficial effect on financial performance, but would have required the bank to let go of some of its cultural mindset. We end the paper with implications for research and practice.


John J. Voyer  (United States)
Professor of Business Administration
Department of Business Administration School of Business
University of Southern Maine

Herbert Smoluk  (United States)

School of Business
University of Southern Maine

Bruce Andrews  (United States)

School of Business
University of Southern Maine

  • Business strategy
  • Geographic diversification
  • System dynamics
  • Banking

(30 min. Conference Paper, English)