Mindfully Resisting the Bandwagon – IT Implementation and Its Consequences in the Financial Crisis

Policy Letter No. 10

Authors:
Roman Beck,
Wolfgang König,
Immanuel Pahlke,
Martin Wolf
Research Area:
Financial Markets
Date:
May 2013
Keywords:
IT innovations, financial services
Abstract:

Although the ”financial meltdown” between 2007 and 2009 can be substantially attributed to herding behaviour in the subprime market for credit default swaps, a “mindless” IT implementation of participating financial services providers played a major role in the facilitation of the underlying bandwagon. The problem was a discrepancy between two core complementary capabilities: (1.) the (economic-rationalistic) ability to execute financial transactions (to comply with the herd) in milliseconds and (2.) the required contextualized mindfulness capabilities to comprehend the implications of the transactions being executed and the associated IT innovation decisions that enabled these transactions.

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