MIS 9003 – Prof. Min-Seok Pang

Week 2 Reading Summary – Tae et al. (2018) – Xi Wu

Tae et al. (2018) When Your Problem Becomes My Problem: The Impact of Airline IT Disruptions on On-Time Performance of Competing Airlines

Disruption within the competitive environment and its subsequent effect on firm performance has been a crucial topic, yet there is few research about the effect on the competitive environment on rival firms when a resource-sharing firm experience an operational disruption. As is well established, the disruption of organizational routines often leads to performance degradation.  This paper argues that, in the presence of a shared resource, the disruption of the focal firm’s routines will also lead to the disruption of the competitors, and subsequently diminish the competitor’s performance. In addition, following the idea of routines as coordination mechanism, the study also examines how the complexity of routines, of both the disrupted firm and the competitor, affects the ability to react.

The empirical context is U.S. airline industry, where individual airports are the shared resource. Airlines have been subject to multiple recent large-scale disruptions. This paper examines the change in on-time performance (OTP) of airlines with and without IT disruptions, for flights departing from and arriving at hub airports of the airline experiencing IT disruptions, relative to all other flights. Complexity of routines could be indicated by full-service carriers (FSC) and low-cost carriers(LLC).

Using a sample data of 75,051 flights during four IT outrage incidents, this paper conducts fixed effect empirical models, and find that disruptions to one airline may have negative effects on the on-time performance of competitors who share the same resource. The direction and the magnitude of the effect is conditional on the routine complexity of the firms. This study complements the literature on firm adaptability under environmental change by considering the role of firm interdependence, and shed light on the impact of routine complexity on firm adaptability and performance.

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