Prior research concerning IT business value has established a link between firm-level IT investment and tangible returns such as output productivity. Research also suggests that IT is vital to intermediate processes such as those that produce intangible output. Among these, the use of IT in innovation and knowledge creation processes is perhaps the most critical to a firm's long-term success. However, little is known about the relationship between IT, knowledge creation, and innovation output. In this study, we contribute to the literature by comprehensively examining the contribution of IT to innovation production across multiple contexts using a quality-based measure of innovation output. Analyzing annual information from 1987 to 1997 for a panel of large U.S. manufacturing firms, we find that a 10% increase in IT input is associated with a 1.7% increase in innovation output for a given level of innovation-related spending. This relationship between IT, research and development (R&D), and innovation production is robust across multiple econometric methodologies and is found to be particularly strong in the mid to late 1990s, a period of rapid technological innovation. Our results also demonstrate the importance of IT in creating value at an intermediate stage of production, in this case, through improved innovation productivity. However, R&D and its related intangible factors (skill, knowledge, etc.) appear to play a more crucial role in the creation of breakthrough innovations.
Prior research at the firm level finds information technology (IT) to be a net substitute for both labor and non-IT capital inputs. However, it is unclear whether these results hold, given recent IT innovations and continued price declines. In this study we extend prior research to examine whether these input relationships have evolved over time. First, we introduce new price indexes to account for varying technological progress across different types of IT hardware. Second, we use the rental price methodology to measure capital in terms of the flow of services provided. Finally, we use hedonic methods to extend our IT measures to 1998, enabling analysis spanning the emergence of the Internet. Analyzing approximately 9,800 observations from over 800 Fortune 1,000 firms for the years 1987-1998, we find firm demand for IT to be elastic for decentralized IT and inelastic for centralized IT. Moreover, Allen Elasticity of Substitution estimates confirm that through labor substitution, the increasing factor share of IT comes at the expense of labor. Last, we identify a complementary relationship between IT and ordinary capital, suggesting an evolution in this relationship as firms have shifted to more decentralized organizational forms. We discuss these results in terms of prior research, suggest areas of future research, and discuss managerial implications.
This paper is the first test of a parsimonious model that posits three factors as determinants of the adoption of electronic data interchange (EDI): readiness ,perceived benefits, and external pressure. To construct the model, we identified and organized the factors that were found to be influential in prior EDI research. By testing all these factors together in one model, we are able to investigate their relative contributions to EDI adoption decisions. Senior purchasing managers, chosen for their experience with EDI and proximity to the EDI adoption decision, were surveyed and their responses analyzed using structural equation modeling. All three determinants were found t be significant predictors of intent to adopt EDI, with external pressure and readiness being considerably more important than perceived benefits. We show that the constructs inthis model canbe categorized into three levels: technological, organizational, and interorganizational. We hypothesize that these categories of influence will also be determinants of the adoption of other emerging forms of interorganizational systems (IOS).