Week 4 – Tafti et al. 2013 – Joe

Ali Tafti, Sunil Mithas, M. S. Krishnan, (2013) The Effect of Information Technology–Enabled Flexibility on Formation and Market Value of Alliances. Management Science 59(1):207-225.

Whereas prior IS studies have focused on the effects of IT in reducing transaction and coordination costs in inter-organization relationships, there has been little understanding regarding the role of flexible IT architecture as an enabler of interfirm collaboration. This study is among the first to examine whether IT architecture flexibility facilitates strategic alliance formation and enables firms to derive value from alliances. The authors 1) examine the effect of three dimensions of IT architecture flexibility (open communication standard, cross-functional transparency, and modularity) on formation of three types of alliances (arm’s-length, collaborative, and joint-venture alliances, respectively) and 2) study how capability in IT flexibility moderate the value derived from alliances.

Utilizing a data set from 169 firms that are publicly listed in the US and that span multiple industries via panel data models (with random effects and fixed effects), they found that adoption of open communication standards is associated with the formation of arm’s-length alliances, and modularity of IT architecture is associated with the formation of joint ventures. Results also showed that the value of alliances is enhanced by overall IT architecture flexibility, implying that all three dimensions of flexibility are important in the value derived from arm’s-length, collaborative and joint-venture alliances.

This study suggests a need for greater consideration of the role of flexibility in IT-driven business process to understand the underpinnings of IT business value in inter-organizational context. I am quite enjoying reading a well-organized paper like this one. The authors showed us a template to write a clear and straightforward paper with a balance between creating knowledge and empirical investigation.