Few academics ever get the chance that Richard Herring has to influence the future of an industry.

Mr. Herring, 43, a professor of finance at the Wharton School of the University of Pennsylvania, will head a $3.36 million research project whose aim is to help the U.S. financial industry become more competitive.

The Alfred P. Sloan Foundation is funding the three-year effort at Wharton, which will involve 30 faculty members and 15 graduate students - experts in economics, sociology, law, and statistics. The project is to begin early next year.

First Sloan-Supported Study of a Service Industry

Appropriately, the Sloan Foundation is named for a legendary chief executive of General Motors Corp., which is viewed as a new breed of competitor for traditional lenders.

The foundation has long supported multidisciplinary studies of U.S. industries, but it has never before turned attention to a service industry. The Wharton School has said the Sloan grant will launch the largest such effort in the financial arena.

Sloan recognizes the financial sector's critical importance in the U.S. economy, said Mr. Herring. He is director of the Wharton Financial Institutions Center, which will coordinate the program.

With about 5 million workers, "financial services employs twice as many people as heavy industries," said Mr. Herring, an international banking expert who consulted for the Federal Reserve Board, the U.S. Treasury, and the central bank of Kuwait.

"If you're worried about raising per-capita income, you have to worry about financial services," he said.

Mr. Herring said the researchers will spend a lot of time analyzing the dynamics of competition, led by technological innovations that have allowed industrial companies and foreign banks to invade the turf of more traditional financial intermediaries and to open new competitive frontiers.

Technology "facilities innovations in financial instruments by making fiendishly difficult math easy," Mr. Herring said. "Everybody's cherry-picking in everybody else's backyard. Diversified financial firms like Sears are in every line of business."

Bankers Respect the Project's Leader

Mr. Herring already has a following in the banking industry.

"His insight and judgment are useful in business situations," said Allen Levinson, managing director of Bankers Trust New York Corp. "He has a practical view of his work."

Mr. Herring also is on the Shadow Financial Regulatory Committee, a panel of self-styled watchdogs over federal bank, thrift, and securities regulators.

The Wharton professor wrote his economics dissertation at Princeton University on the flow of capital among advanced countries and how it affects interest rates. That led to an interest "in the banks and institutions underlying the data," he said.

Expanding Definition

One objective of the Wharton project is to consider all types of financial organizations as part of a single industry, thrown together by competition and deregulation and facing common issues in areas like regulation, management, and performance measurement.

The study's findings will be disseminated through seminars, articles, and publications and will influence changes in the business school's curriculum, Mr. Herring said.

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