This study investigates the development and sustainability of a firm's information technology (IT) capability reputation from an IT executive's standpoint. Building on institutional theory, we argue that IT executives will try to achieve external legitimacy (i.e., project an image of superior IT capability to external stakeholders) in the hope that the top management team and board members will reciprocate by elevating the internal legitimacy of IT executives. Firms that develop such a culture of reciprocity with their IT executives are more likely to sustain their IT capability reputation. Econometric results based on panel data for 1,326 large U.S. firms from a wide spectrum of industries over a 13-year period (1997-2009) validate these predictions. More specifically, we find that IT executives with greater structural power (e.g., higher job titles) or IT-related expert power (e.g., IT-related education or experience) are more likely to attract public recognition for their firm's IT capability. Firms that build such an IT capability reputation are more likely to promote their IT executives, and IT executives who are promoted are more likely to stay longer with their firms. This continuity in IT strategic leadership is positively associated with the firm's ability to sustain its IT capability reputation. Our findings have important practical implications related to a firm's IT reputation strategy as well as the motivation and career of IT executives. Firms wanting to develop and sustain their IT capability reputation would do well to foster the creation of a cycle of positive reciprocity with their IT executives. IT executives hoping to increase their power within their firm's top management team and improve the legitimacy of the firm's IT organization need to project an image of IT superiority to external stakeholders.
Virtual worlds are relatively nascent IT platforms with the potential to radically transform business processes and generate significant payoffs. However, in striving to achieve specific outcomes, firms may incur significant risks. Although many companies claim to have attained substantial benefits from their virtual world initiatives, many others have recently scaled down or even abandoned their experimental virtual world projects. This paper assesses the value proposition of virtual world initiatives from the real options perspective. Specifically, we argue that virtual worlds act as a firm's growth option, and we adopt the lens of real options to evaluate the value of this emerging and uncertain technological platform. We employ the event study method to assess the stock market's perception of the future revenue streams of 261 virtual world initiatives announced between 2006 and 2008. Our results indicate that, overall, the market reacts positively to virtual world initiatives. Our findings also show that investors' reactions to virtual world initiatives are contingent on four key characteristics of virtual world initiatives: interpretive flexibility (i.e., technologies that allow managers to experiment), divisibility (i.e., ability to incrementally implement the technology), strategic importance (i.e., an initiative that affects a process of strategic importance to the firm), and exploitable absorptive capacity (i.e., ability to exploit the knowledge acquired through the initiative). We discuss the key implications for real-world practitioners and suggest directions for future research.
Organizations seek to differentiate themselves in the marketplace by deploying information technology (IT) to develop dynamic IT capabilities and resist competitors' attempts to imitate or improve these capabilities. While this strategy has been justified on the grounds that dynamic IT capabilities are durably heterogeneous, there does not seem to be empirical evidence supporting or refuting this assumption. This study empirically validates the assumption of durable heterogeneity of dynamic organizational IT capability (ITC) due to path dependence. We capture ITC heterogeneity by introducing a framework in which firms try to achieve ITC leadership in their industry and we propose that durable ITC heterogeneity can be attributed to path dependence, and hence, it can be tested using Heckman's true state dependence of ITC leadership status. Using random and fixed effect dynamic logit models, we investigate true state dependence of ITC leadership on a sample of large U.S. firms. The results, which are robust to alternative sample, dependent, and control variable specifications, show that achieving ITC leadership is a true state-dependent process, suggesting durable heterogeneity of ITC due to path dependence. The study contributes to the dynamic capabilities literature and has important managerial implications. The proposed framework for conceptualizing durable resource heterogeneity due to path dependence is general and versatile, thus providing a foundation for future research on dynamic capabilities. The findings provide empirical evidence to confirm that ITC is durably heterogeneous and should be managed as a potential source of competitive advantage.