The Pathway to Achieving Competitive Advantage in Banking: Development and Testing of a Five-Layer Hierarchical Model

The objective of this study was to develop and empirically test a five-layer hierarchical model explaining the sequential pathway through which banks achieve sustainable competitive advantage. This applied research adopted a descriptive–correlational design with an organizational level of analysis. The statistical population consisted of senior and middle managers of public and private banks, from which a sample of 400 managers was selected using simple random sampling. Data were collected using a researcher-developed questionnaire including 25 items representing 5 latent constructs, with 5 items per construct, measured on a 5-point Likert scale. Content validity was confirmed through expert evaluation, and reliability was assessed using Cronbach’s alpha, composite reliability, and average variance extracted, all exceeding recommended thresholds. Data analysis was conducted using Partial Least Squares Structural Equation Modeling (PLS-SEM), and bank ownership type (public vs. private) was included as a control variable in the structural model. The results showed that organizational structure and systems had a significant positive effect on human capital and organizational culture (β = 0.79, p < 0.01) and on stakeholder quality and management (β = 0.46, p < 0.01), but no significant effect on ethical and adaptive leadership (p > 0.05). Human capital and organizational culture had a strong positive effect on ethical and adaptive leadership (β = 0.84, p < 0.01), which in turn significantly influenced stakeholder quality and management (β = 0.49, p < 0.01). Stakeholder quality and management exerted a very strong effect on strategic growth and competitive advantage (β = 0.89, p < 0.01). The coefficients of determination ranged from R² = 0.63 to R² = 0.78, indicating high explanatory power. The findings confirm that competitive advantage in banking is achieved through a structured, multi-layer process in which organizational structure, human capital, leadership, and stakeholder management interact sequentially to drive strategic growth.