Financial bureaucracy featuring innovation bureaucracy – insights from diverging pathways in Estonia and Lithuania

Abstract

The paper investigates the integration of innovation-centric characteristics within traditional financial bureaucracies as they confront the rise of the FinTech sector. From the financial governance perspective, FinTech acts as a significant disruptive force, challenging the established operational mandates of state financial institutions and compelling them to reassess their role in the digital economy. The paper explores this dynamic through the theoretical lens of ‘transformative capacity’, which analyses how organisational roles, resources and abilities enable or constrain adaptation to a socio-technical change underpinned by FinTech, focusing on the core tension between fostering innovation and ensuring financial market integrity and stability. Using a comparative case study of Estonia and Lithuania, the research reveals divergent national trajectories. Lithuania displays a change-embracing, ‘innovation-oriented’ bureaucracy (at least initially), characterised by strong leadership, a unified institutional structure and robust coordination and learning mechanisms. In contrast, Estonia exhibits a fragmented, ‘stability-oriented’ bureaucracy marked by resource constraints, weaker coordination and a reactive posture that leverages its e-state capacity more for internal efficiency than sector-wide support. The study concludes that institutional structures, resource allocation and leadership are critical in shaping a financial bureaucracy’s capacity for agile stability, thereby determining the state’s effectiveness in navigating the FinTech landscape.

The authors' abstract, as published at the source. New Political Economy, 2026 · DOI ↗