Fintech, strategic adaptation in shock of COVID-19: A review of the empirical literature

Authors: 
Tien Phat Pham, Tri Ba Tran, Thuan Xuan NguYen
DOI Number: 
http://doi.org/10.31039/jomeino.2022.6.3.3
Abstract: 
This study is an empirical literature review about the strategic adaptation in the context of COVID-19 that is a cause of economic shock. We reviewed existing publications and determined that COVID-19 is an economic shock; it significantly influences firm strategy. Besides that, the fintech company's characteristics and the firm respondents' experience lessons from the previous crisis are explored, which are the background to propose the two strategic adaptations for the fintech company. Firstly, the consolidation strategy for the time of COVID-19 contains three respondents: maintain frequent operational activities, increase research and development investment, and implement marketing campaigns. Secondly, in the spreading strategy for the post-COVID-19 period, we recommend a product and customer diversification strategy, concentrating on the risk of law and allocating resources efficiently. Besides that, we discuss the trend of an alliance network between the fintech company and the traditional financial institution, like the win-win strategy for both entities. Furthermore, suggestions for the directors of the fintech companies and directions for further research are proposed.
Keywords: 
COVID-19, fintech, strategic adaptation, crisis, economic shock.
Full Text: 
File download
References: 

Aldamen, H., Duncan, K., Kelly, S., & McNamara, R. (2020). Corporate governance and family firm performance during the global financial crisis. Accounting and Finance, 60(2), 1673–1701. https://doi.org/10.1111/acfi.12508 Archibugi, D., Filippetti, A., & Frenz, M. (2013). The impact of the economic crisis on innovation: Evidence from Europe. Technological Forecasting and Social Change, 80(7), 1247–1260. https://doi.org/10.1016/j.techfore.2013.05.005 Arner, A., Arner, D. W., Barberis, J., & Buckley, R. P. (2015). The evolution of FinTech: A new post-crisis paradigm?. http://hdl.handle.net/10722/221450 Arner, D. W., Barberis, J., & Buckley, R. P. (2017). Fintech, regtech, and the reconceptualization of financial regulation. Northwestern Journal of International Law & Business, 37(3), 371–413. http://scholarlycommons.law.northwestern.edu/njilb/vol37/iss3/2 Bachmann, A., Becker, A., Buerckner, D., Hilker, M., Kock, F., Lehmann, M., & Tiburtius, P. (2011). Online peer-to-peer lending: A literature review. Journal of Internet Banking and Commerce, 16(2), 1–18. https://search.proquest.com/docview/915655604?accountid=15518 Baker, S., Bloom, N., Davis, S., & Terry, S. (2020). COVID-induced economic uncertainty. In National Bureau of Economic Research. https://doi.org/10.3386/w26983 Bartik, A., Bertrand, M., Cullen, Z., Glaeser, E., Luca, M., & Stanton, C. (2020). How are small businesses adjusting to COVID-19? Early evidence from a survey. In SSRN Electronic Journal. https://doi.org/10.3386/w26989 Calvo, G. A. (1998). Capital flows and capital market crisis: The simple economics of sudden stops. Journal of Applied Economics, 1(1), 35–54. https://doi.org/10.1080/15140326.1998.12040516 Caporale, G. M., Gil-Alana, L., & Plastun, A. (2018). Persistence in the cryptocurrency market. Research in International Business and Finance, 46(January), 141–148. https://doi.org/10.1016/j.ribaf.2018.01.002 Chakrabarti, A. (2015). Organizational adaptation in an economic shock: The role of growth reconfiguration. Strategic Management Journal, 36(11), 1717–1738. https://doi.org/10.1002/smj.2309 Claeys, A.-S., & Cauberghe, V. (2012). Crisis response and crisis timing strategies, two sides of the same coin. Public Relations Review, 38(1), 83–88. https://doi.org/10.1016/j.pubrev.2011.09.001 Coleman, S., & Robb, A. M. (2011). Financing strategies of new technology-based firms. Review of Economics & Finance, 1, 1–18. http://www.bapress.ca/Journal-4/Financing Strategies of New Technology-based Firms.pdf Cumming, D. J., & Schwienbacher, A. (2018). Fintech venture capital. Corporate Governance: An International Review, 26(5), 374–389. https://doi.org/10.1111/corg.12256 da Cruz Caria, P. (2017). FinTech: An explorative study into the characteristics of their business models. Information & Knowledge Management, BA: Inform, 1–47. https://doi.org/10.13140/RG.2.2.28224.53767 Dimitropoulos, P. E. (2020). R&D investments and profitability during the crisis: Evidence from Greece. R&D Management, radm.12424. https://doi.org/10.1111/radm.12424 Dorfleitner, G., Hornuf, L., Schmitt, M., & Weber, M. (2017). FinTech in Germany. In FinTech in Germany. Springer International Publishing. https://doi.org/10.1007/978-3-319-54666-7 Edelman, L. F., Manolova, T., Shirokova, G., & Tsukanova, T. (2016). The impact of family support on young entrepreneurs’ start-up activities. Journal of Business Venturing, 31(4), 428–448. https://doi.org/10.1016/j.jbusvent.2016.04.003 Erman, C. (2017). Financial technologies effect on financial services from an open innovation perspective. The Lappeenranta University of Technology. Fernandes, N. (2020). Economic effects of coronavirus outbreak ( COVID-19 ) on the world economy. SSRN Electronic Journal, 1–29. https://ssrn.com/abstract=3557504 Fonseca, V., Pacheco, L., & Lobão, J. (2019). Psychological barriers in the cryptocurrency market. Review of Behavioral Finance, 12(2), 151–169. https://doi.org/10.1108/RBF-03-2019-0041 Fu, J., & Mishra, M. (2020). The global impact of COVID-19 on Fintech adoption. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3588453 Goldstein, I., Jiang, W., & Karolyi, G. A. (2019). To FinTech and beyond. The Review of Financial Studies, 32(5), 1647–1661. https://doi.org/10.1093/rfs/hhz025 Goodell, J. W. (2020). COVID-19 and finance: Agendas for future research. Finance Research Letters, 35(April). https://doi.org/10.1016/j.frl.2020.101512 Hasanat, M. W., Hoque, A., Shikha, F. A., Anwar, M., Hamid, A. B. A., & Tat, H. H. (2020). View of the impact of Coronavirus (COVID-19) on e-business in Malaysia.pdf. Asian Journal of Multidisciplinary Studies, 3(1), 85–90. https://asianjournal.org/online/index.php/ajms/article/view/219/100 Hung, J. L., & Luo, B. (2016). FinTech in Taiwan: a case study of a bank’s strategic planning for an investment in a FinTech company. Financial Innovation, 2(1). https://doi.org/10.1186/s40854-016-0037-6 Jennings, P. L. (2004). Strategic adaptation: A uni or multi dimensional concept? Strategic Change, 13(1), 1–10. https://doi.org/10.1002/jsc.663 Jiang, X., Jiang, F., Arino, A., & Peng, M. W. (2017). Uncertainty, adaptation, and alliance performance. IEEE Transactions on Engineering Management, 64(4), 605–615. https://doi.org/10.1109/TEM.2017.2713823 Knudsen, E. S., & Lien, L. B. (2019). Hitting the gas or the brake? Recessions and firms’ knowledge investments. Managerial and Decision Economics, 40(8), 1000–1015. https://doi.org/10.1002/mde.3086 Kontogeorgos, A., Chatzitheodoridis, F., & Loizou, E. (2016). Adaptation strategies for the Greek agricultural cooperatives during the economic crisis. Agricultural Economics (Zemědělská Ekonomika), 62(No. 1), 26–34. https://doi.org/10.17221/22/2015-AGRICECON KPMG. (2020). COVID-19 financial reporting implications. https://assets.kpmg/content/dam/kpmg/lk/pdf/2020/covid-19-impact-on-fina... Laitinen, E. K. (2000). Long-term success of adaptation strategies: Evidence from Finnish companies. Long Range Planning, 33(6), 805–830. https://doi.org/10.1016/S0024-6301(00)00088-1 Lee, I., & Shin, Y. J. (2018). Fintech: Ecosystem, business models, investment decisions, and challenges. Business Horizons, 61(1), 35–46. https://doi.org/10.1016/j.bushor.2017.09.003 Leung, S., & Horwitz, B. (2010). Corporate governance and firm value during a financial crisis. Review of Quantitative Finance and Accounting, 34(4), 459–481. https://doi.org/10.1007/s11156-009-0141-z Levine, R. (1997). Financial development and economic growth: Views and agenda. Journal of Economic Literature, 35(2), 688–726. https://doi.org/10.1596/1813-9450-1678 Madurai Elavarasan, R., & Pugazhendhi, R. (2020). Restructured society and environment: A review on potential technological strategies to control the COVID-19 pandemic. Science of The Total Environment, 725, 138858. https://doi.org/10.1016/j.scitotenv.2020.138858 Martin-Rios, C., & Pasamar, S. (2018). Service innovation in times of economic crisis: The strategic adaptation activities of the top E.U. service firms. R&D Management, 48(2), 195–209. https://doi.org/10.1111/radm.12276 Milian, E. Z., Spinola, M. de M., & Carvalho, M. M. d. (2019). Fintechs: A literature review and research agenda. Electronic Commerce Research and Applications, 34. https://doi.org/10.1016/j.elerap.2019.100833 Ngah-Kiing Lim, E., Das, S. S., & Das, A. (2009). Diversification strategy, capital structure, and the Asian financial crisis (1997-1998): Evidence from Singapore firms. Strategic Management Journal, 30(6), 577–594. https://doi.org/10.1002/smj.752 Nicola, M., Alsafi, Z., Sohrabi, C., Kerwan, A., Al-Jabir, A., Iosifidis, C., Agha, M., & Agha, R. (2020). The socio-economic implications of the coronavirus pandemic (COVID-19): A review. International Journal of Surgery, 78(April), 185–193. https://doi.org/10.1016/j.ijsu.2020.04.018 Nicoletti, B. (2017). The future of Fintech integrating finance and technology in financial services. In Palgrave Macmillan. Palgrave Macmillan. http://www.springer.com/series/14627 Notta, O., & Vlachvei, A. (2014). The impact of financial crisis on firm performance in case of Greek food manufacturing firms. Procedia Economics and Finance, 14(14), 454–460. https://doi.org/10.1016/S2212-5671(14)00734-5 Park, A., Yang, D., Shi, X., & Jiang, Y. (2010). Exporting and firm performance: Chinese exporters and the Asian financial crisis. Review of Economics and Statistics, 92(4), 822–842. https://doi.org/10.1162/REST_a_00033 Pearce, J. A., & Michael, S. C. (1997). Marketing strategies that make entrepreneurial firms recession-resistant. Journal of Business Venturing, 12(4), 301–314. https://doi.org/10.1016/S0883-9026(97)89449-9 Pearce, J. A., & Michael, S. C. (2006). Strategies to prevent economic recessions from causing business failure. Business Horizons, 49(3), 201–209. https://doi.org/10.1016/j.bushor.2005.08.008 Peter, D. D. (2016). An analysis of cryptocurrency, bitcoin, and the future. International Journal of Business Management and Commerce, 1(2), 1–9. https://ijbmcnet.com/images/Vol1No2/1.pdf Puschmann, T. (2017). Fintech. Business & Information Systems Engineering, 59(1), 69–76. https://doi.org/10.1007/s12599-017-0464-6 Ramelli, S., & Wagner, A. F. (2020). Feverish stock price reactions to the novel coronavirus. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3550274 Romānova, I., & Kudinska, M. (2016). Banking and Fintech: A challenge or opportunity? In Contemporary Studies in Economic and Financial Analysis (Vol. 98, pp. 21–35). https://doi.org/10.1108/S1569-375920160000098002 Saksonova, S., & Kuzmina-Merlino, I. (2017). Fintech as financial innovation - The possibilities and problems of implementation. European Research Studies Journal, 20(3A), 961–973. https://doi.org/10.35808/ersj/757 Schindehutte, M., & Morris, M. H. (2001). Understanding strategic adaptation in small firms. International Journal of Entrepreneurial Behavior & Research, 7(3), 84–107. https://doi.org/10.1108/EUM0000000005532 Shenoy, V., Mahendra, S., & Vijay, N. (2020). COVID 19 lockdown technology adaption, teaching, learning, students engagement and faculty experience. Mukt Shabd Journal, 9(4), 698–702. https://www.researchgate.net/publication/340609688 Son, H. (2020, June 12). U.S. banks are ‘swimming in money’ as deposits increase by $2 trillion amid the coronavirus. CNBC. https://www.cnbc.com/2020/06/21/banks-have-grown-by-2-trillion-in-deposi... Spender, J.-C., Corvello, V., Grimaldi, M., & Rippa, P. (2017). Startups and open innovation: A review of the literature. European Journal of Innovation Management, 20(1), 4–30. https://doi.org/10.1108/EJIM-12-2015-0131 Tybout, J., & Bark, T. (1988). Macro shocks and industrial portfolio responses : An econometric model for LDCs. The Review of Economics and Statistics, 70(4), 559–568. https://www.jstor.org/stable/pdf/1935818.pdf Van Loo, R. (2018). Making innovation more competitive: The case of fintech. UCLA Law Review, 65(1), 232–279. https://ssrn.com/abstract=2966890 Wenzel, M., Stanske, S., & Lieberman, M. B. (2020). Strategic responses to crisis. Strategic Management Journal, March, 7–18. https://doi.org/10.1002/smj.3161 Yazici, M. (2020). The impact of Covid-19 on payment systems in Turkey. International Journal of Information Research and Review, 07(5), 6911–6917. https://www.ijirr.com/sites/default/files/issues-pdf/3606.pdf You, C. (2018). Recent development of FinTech regulation in China: A focus on the new regulatory regime for the P2P lending (Loan-based crowdfunding) market. Capital Markets Law Journal, 13(1), 85–115. https://doi.org/10.1093/cmlj/kmx039 Zachariadis, M., Ozcan, P., & Dinckol, D. (2020). The Covid-19 impact on fintech: Now is the time to boost investment. The London School of Economics and Political Science. http://eprints.lse.ac.uk/104463/ Zetzsche, D. A., Buckley, R. P., Arner, D. W., & Barberis, J. N. (2017). From FinTech to TechFin: The regulatory challenges of data-driven finance. Journal of Law and Business, 14(2). http://ssrn.com/abstract=2959925 Zhang, D., Hu, M., & Ji, Q. (2020). Financial markets under the global pandemic of COVID-19. Finance Research Letters, April, 101528. https://doi.org/10.1016/j.frl.2020.101528

Page: 
33-46.
Issue: 
Volume 6, Number 3, September-December 2022
Content Status: 
Published