Week2 Summary_Tambe et al. (2012)_ Yaeeun Kim

This paper is meaningful to add the third value, external focus, based on the prior work. This 3-way model explains the productivity of the firm at the best. External focus is a set of practices that firms use to detect changes in their external operating environment.

Findings suggest that firms can more successfully leverage IT investments if they effectively capture external information through networks of customers, suppliers, partners, and new employees.

This paper contributes to a literature on IT value, supporting the argument that organizational complements lead to higher IT returns.

They also build upon prior work that addresses complementarities between IT and internal practices such as decentralized decision making but add the external orientation dimension which has been shown to be important in technology-intensive firms.

The survey questions was conducted by telephone and includes a new set of measurements, which include external and internal information practices, human capital mix such as occupational and educational distributions.

For its econometric method, organizational inhibitors were used as instrumental variables because they reflect the cost faced by firms in adopting new organizational practices.

In their correlation tests, external focus measure is correlated with IT measure and decentralization measure. The correlation between workplace organization and external focus suggests that the decentralization leads external information practices (although the correlation does not explain the causality, it can be interpreted as above when we bring our common knowledge).

By adding individual inhibitors of organizational transformation and location variables as instruments, decentralization was more associated with effective management of the product line. This finding suggests that capturing external information is important, but at the same time, governing internal information processing boosts product leadership by managing products in a timely manner.