Drawing on the notion of channel capability, we develop a theoretical ramework for understanding the interactions between mobile and traditional online channels for products with different characteristics. Specifically, we identify two channel capabilities-access and search capabilities-that differentiate mobile and online channels, and two product characteristics that are directly related to the channel capabilities-time criticality and information intensity. Based on this framework, we generate a set of predictions on the differential effects of mobile channel introduction across different product categories. We test the predictions by applying a counterfactual analysis based on vector autoregression to a large panel data set from a leading e-market in Korea that covers a 28-month period and contains all of the transactions made through the online and mobile channels before and after the mobile channel introduction. Consistent with our theoretical predictions, our results suggest that the performance impact of the mobile channel depends on the two product characteristics and the resulting product-channel fit. We discuss implications for theory and multichannel strategy.
Does information technology outsourcing reduce non-IT operating costs? This study examines this question and also asks whether internal IT investments moderate the relationship between IT outsourcing and non-IT operating costs. Using a panel data set of approximately 300 U.S. firms from 1999 to 2003, we find that IT outsourcing has a significant negative association with firms' non-IT operating costs. However, this finding does not imply that firms should completely outsource their entire IT function. Our results suggest that firms benefit more in terms of reduction in non-IT operating costs when they also have higher levels of complementary investments in internal IT, especially IT labor. Investments in internal IT systems can make business processes more amenable to outsourcing, and complementary investments in internal IT staff can facilitate monitoring of vendor performance and coordination with vendors. We discuss the implications of these findings for further research and for practice.
In this study, we investigate the economic and strategic value of open innovation alliances (OIAs), in which collaborators and competitors integrate in the pursuit of the codevelopment of technological innovations. Given that OIAs differ substantially from traditional, closed alliances in many aspects, including their strategic scope and scale, governing mechanisms, and member composition, it is important to understand and assess the potential value inherent in these new modes of collaboration. Furthermore, OIAs evolve over time as the participating members are free to enter and leave at will. Therefore, we also examine the on-going value creation and wealth spillover that result from changes in membership. Moreover, we investigate how a firm's participation in an IT-based open alliance alters the market value of its rivals operating within the same marketplace. To gain additional insight into the factors that moderate the market valuation of OIA participation, several contextual factors, including the degree of partner heterogeneity, innovation type, and degree of openness of the OIAs are used to account for variability in abnormal returns. Based on 194 observations,we found that allying firms realize significant positive abnormal returns when their entry into an OIA is made public. The results also suggest that substantial excessive returns accrue to the allying firms with the related entry of a market leader firm. Furthermore, we discovered that a firm's entry into an OIA increases, rather than decreases, the market valuation of its rivals. Interestingly, an incumbent rival that did not participate in the alliance appears to gain greater "free-riding" benefits from the OIA, as compared to peer rivals. Innovation type and openness were significantly associated with the amount of abnormal returns accruing to allying firms, while no significance was found for partner heterogeneity. Finally, we conclude with a discussion of the implications of our findings for research and practice with respect to value cocreation in multifirm environments.
This study extends existing information technology (IT) productivity research by evaluating the contributions of spending in IT outsourcing using a production function framework and an economy wide panel data set from 60 industries in the United States over the period from 1998 to 2006. Our results demonstrate that IT outsourcing has made a positive and economically meaningful contribution to industry output and labor productivity. It has not only helped industries produce more output, but it has also made their labor more productive. Moreover, our analysis of split data samples reveals systematic differences between high and low IT intensity industries in terms of the degree and impact of IT outsourcing. Our results indicate that high IT intensity industries use more IT outsourcing as a percentage of their output, but less as a percentage of their own IT capital, and they achieve higher returns from IT outsourcing. This finding suggests that to gain greater value from IT outsourcing, firms need to develop IT capabilities by intensively investing in IT themselves. By comparing the results from subperiods and analyzing a separate data set for the earlier period of 1987-1999, we conclude that the value of IT outsourcing has been stable from 1998 to 2006 and consistent over the past two decades. The high returns we find for IT outsourcing also suggest that firms may be underinvesting in IT outsourcing.
We study interindustry information technology (IT) spillover wherein IT investments made by supplier industries increase the productivity of downstream industries. Using data from U.S. manufacturing industries, we find that industries receive significant IT spillover benefits in terms of total factor productivity growth through economic transactions with their respective supplier industries. More importantly, we find that two characteristics of downstream industries, namely, IT intensity and competitiveness, which have been shown to moderate the effect of internal IT investments, play an important role in IT spillovers as well. Our results suggest that IT intensity as well as competitiveness of the downstream industry moderate the effect of IT spillovers-industries that are more IT intensive and more competitive benefit more from IT spillovers. Finally, our results suggest that the long-term effects of spillovers are greater than short-term effects, suggesting that learning periods are required to reap the benefits from the IT spillovers.
We develop a model based on the theory of incomplete contracts for how ownership structure of interorganizational systems (IOS) can affect information exploitation and information technology adoption. Our model yields several propositions that suggest the appropriate strategic actions that a firm may take when there is potential for IOS adopters to question whether adopting the IOS will be value-maximizing. We analyze and illustrate the related strategic thinking in a real-world context involving a financial risk management IOS. We present a case study of the ownership and spin-off of RiskMetrics, developed by New York City--based investment bank, J.P. Morgan, in the late 1980s. The firm first gave RiskMetrics to its correspondent banking, treasury, and investment clients for free, in the context of its clearing account relationship services. Later, the bank spun off the product to an independent company that offered fee-based services. We model the bank's clients in terms of their heterogeneous portfolio risks, and their effects on the value a client can gain from adopting the technology. We also examine the value they may lose if their private portfolio risk information is exploited. A key roadblock to the adoption of the free service may have been the potential for strategic information exploitation by the service provider. When Morgan spun off RiskMetrics with multiparty ownership, wider adoption occurred. Our theory interprets this strategic move as an appropriate means to maximize long-term profits when information exploitation may occur.