Abstract for: Reducing income volatility through better resource-sharing policies: The case of the investment banking industry
This paper is based on the hypothesis that income volatility is influenced by endogenous resource sharing policies. The effect of competition on internal resources on income volatility is examined using the case of the investment banking industry. After analyzing income volatilities of different industries, specific characteristics of investment banks are illustrated guided by the service production theory. After this, the income volatility of two product groups of investment banks is analyzed on an industry wide level. To gain deeper insight into the competition on a shared resource the two-shower model of Morecroft et al. is analyzed. By discussing the adaptations of a translation into an investment banking context, a stylized causal loop diagram is derived. In this last step, a product group is identified and the real internal production data is broken down into primary and secondary business units is analyzed. The results show first indications of a competition from primary and secondary units on shared sales teams.