The impact of multi-channel and multi-product strategies on firms' risk-return performance

This paper investigates the impact of a firm's multi-channel and multi-product strategies on its risk-return performance. We argue that channel diversity is positively associated with a firm's profitability and negatively associated with its profit volatility, and that channel diversity and product diversity are complementary in driving these profit-enhancing and volatility-suppressing effects. We test our hypotheses in the U.S. credit union industry, in which credit unions offer a variety of loan and deposit products through a variety of online and offline channels, including physical branches, ATMs, telephone banking, online banking, and mobile banking. By analyzing a longitudinal dataset of 7577 credit unions in 2009-2016, the study provides empirical evidence that operating a full spectrum of online and offline channels leads to higher profitability and lower profit volatility for credit unions. The study also reveals differential moderating effects of loan product diversity and deposit product diversity, in that loan product diversity enhances the profit-enhancing effect of channel diversity while deposit product diversity enhances the volatility-suppressing effect of channel diversity. This paper contributes to the studies of channel-based strategic differentiation as a competitive strategy and the studies of firms' risk-return performance. (C) 2018 Elsevier B.V. All rights reserved.