Week11_Tambe and Hitt (2014)_Yaeeun Kim

This study purposed to test the hypothesis that firms benefit from the IT investments of other firms because the flow of specialized technical know-how among organizations facilitates the implementation of new IT innovations. The network provides the basis of the flow of knowledge. As the development of a workforce of engineers with experience redesigning workflow is important for the diffusion of new production methods, IT workers play a similarly important role in spreading the expertise in organizations.

The result suggests that IT labor flows are an important mechanism for the transmission of productivity spillovers related to IT-enabled production methods. In the robust estimates, the elasticity of the pool of external IT investment takes how volume of internal IT investment. This shows that firms located in high density of high-tech companies, where IT investment is likely to be much higher, may receive substantial economic benefit. The benefits are oriented form IT labor flows among firms. The study showed that IT labor flow explains the underlying mechanism, which drives regional IT spillovers.

The findings imply that manager should pay attention to locate their firms in the middle of the IT spill-over. The paper suggests Silicon Valley as an option. The location brings competitive benefits to attract workers. On the other hand, policy makers are suggested to focus on shaping the industry as rigid labor market with high level of labor mobility. The study is however limited in explaining how to develop IT spill-over effect by adopting IT.