Information technology capability, competitive advantage and bank profitability: evidence from Vietnamese commercial banks

This study examines the impact of information and communication technology capability (ICT), bank competitive advantage (measured by market power LERNER index) and their interaction on the profitability of Vietnamese commercial banks. Using panel data from 31 banks between 2006 and 2022, the analysis applies the fixed-effect model with robust clustered standard errors. The results indicate that ICT capability and bank competitive advantage are both important determinants of bank profitability; however, their interaction reveals a long-term negative effect, indicating that ICT diminishes the profit advantage of banks with strong market power and that the marginal returns from ICT investment are lower for larger, more dominant banks compared to smaller ones. These findings contribute empirical evidence of how technology and market structure jointly shape financial performance of commerical banks in emerging markets. Policy implications highlight the need to optimize ICT strategies, promote fair competition and support digital transformation across different bank sizes.