Jan 01 1993

Evolutionary Development of Credit Unions

Report  
Number  
2

This study focuses on credit unions’ foundings, failures, and changes as the credit union movement is impacted by environmental forces.

Terry L. Amburgey
University of Kentucky
M. Tina Dacin
Texas A&M University
Report Number 2

Executive Summary

This study is based on the premise that populations of organizations evolve through differential rates of foundings, failures, and changes to existing organizations. Attention is focused on credit unions' foundings, failures and changes as the credit union movement is impacted by environmental forces. The population of credit unions is viewed as changing in three ways: through the exit process by failure or merger; through the entry process of founding new credit unions; or through the change process. This study focuses on two types of potential changes: the addition of common bond groups to the field of membership and the addition of services.

What is this research about?

The researchers examine the role that government policy exerted on the ongoing evolution of credit unions and the financial ratios that increase the likelihood of a credit union’s failure or merger. In addition, Amburgey and Dacin suggest that the greater the number of services offered in a service category, the greater the likelihood that an additional service in the same category will be offered. An important aspect of this research study is its analysis of whether selection processes such as changes in field of membership regulation, increasingly sophisticated technology, and demands for services by credit union members are segmenting credit unions into two strategic groups: one with credit unions that emphasize the solidarity of a common bond, provide a relatively narrow selection of services, and compete only indirectly with other financial service organizations; the other with large, full-service credit unions that directly compete with other financial service organizations.

What are the credit union implications?

Organizations grow and evolve in response to internal and external influences. Such a growth process gives each organization a unique personality that affects its response to new changes in its environment. Therefore, understanding credit unions' process of development provides helpful insights for the planning process that is necessary for them to effectively cope with the rapid transformations that lie ahead.