Information Technology, Network Structure, and Competitive Action—Ada

Information Technology, Network Structure, and Competitive Action

Motivation:

Recent research suggests that the structure of alliance networks is an important determinant of firms’ potential to access valuable knowledge and resources which, in turn, enable them to outcompete rivals. But the conclusions are competing. Some researchers emphasize the advantages of dense network structure in which all partners of a focal firm closely collaborate with one another. Alternatively, other researchers argue that a sparse network structure rich in structural holes is beneficial to the firms.

Research Question:

We examine how these two contrasting types (dense and sparse) of network structure affect competitive behavior of firms and what is the role of IT as an important moderator of the relationship between each type of network structure and competitive firm behavior.

Data and Method:

• Firm-level panel data;
• Random effect;

Main Findings:

• Firms can benefit from both types of network structure. First, structure holes have a positive direct effect on automakers’ ability to compete aggressively by undertaking a greater volume and a broader range of competitive actions. Second, we have also found a positive effect of network density on action volume and action complexity when automakers have a high level of IT-enabled capability.
• IT-enabled capability has a distinctive effect on each type of network structure which, in turn, has significant implications on firms’ competitive behavior. In particular, IT-enabled capability plays two roles: complementary and substitutive. On one hand, we have found that IT-enabled capability enhances (complements) the effects of network density on competitive actions. On the other hand, IT-enabled capability compensates for (or substitutes) the effects of structural holes on competitive action.

Background Reading: (Shaping Agility Through Digital Options: Reconceptualizing The Role Of Information Technology In Contemporary Firms)

By drawing upon recent thinking in the strategy entrepreneurship and IT management literatures, this paper clarified how information technology investments and capabilities   influence   firm performance by shaping three significant organizational capabilities (agility, digital options and entrepreneurial alertness) and strategic processes (capability­ building   entrepreneurial action and co-evolutionary adaptation).