Xinyu Li
Week 14_Kapoor and Adner (2012)_Xinyu
What Firms Make vs. What They Know: How Firms’ Production and Knowledge Boundaries Affect Competitive Advantage in the Face of Technological Change
This paper is an exploration of how the relationship between technological change and firm performance is affected by ways in which firms are organized. According to transaction cost theory, firms typically choose to vertically integrate (hierarchies) or not (markets), whereas knowledge-based view says that firms have the option to integrate knowledge even they don’t want to integrate labor (vertical integration). Draw on these notions, this paper proposes that, when facing technological change, 1) vertically integrated firms generally perform better and have greater competitive advantage than non-integrated firms; 2) the type of technological changes (component change vs architectural change) moderates the advantage firms gain from vertical integration; and 3) among non-integrated firms, those with knowledge integration generally do better than those without knowledge integration.
The research is conducted in the context of global dynamic random access memory (RAM) industry. Firms’ performance as the dependent variable is measured by the time needed to launch product with new technology to the market (time-to-market). Key independent variables include a dummy to indicate vertical integration or not, knowledge of externally produced components (patent-based measurement), and a dummy to indicate the type of technological changes. The paper adopts an accelerated failure time (AFT) model, which is one kind of survival analysis assuming that the effect of a covariate is to accelerate or decelerate the life course of a process by some constant.
The empirical findings show that vertical integration increases time-to-market performance, moderating by the type of technological changes, and knowledge integration also increases time-to-market performance. However, the results reveal an interesting fact that knowledge integrated firms with partial vertical integration benefit less than their counterparts with no vertical integration at all.
Week12_Salge et al. (2015)_Xinyu
Investing in Information Systems: On the Behavioral and Institutional Search Mechanisms Underpinning Hospitals’ IS Investment Decisions
While most of the literature on IS investment is focusing on the adoption and the value of IS investments, little literature inquiries the determinants of those investments. To this end, this paper conceptualizes senior managers’ decisions on IS investments in hospitals as four search mechanisms that jointly determine IS investment intensity of an organization.
Based on the behavioral theory of the firm (for the first two mechanisms) and the institutional theory (for the last two mechanisms), the four search mechanisms proposed are problemistic search, slack search, institutionalized search, and mimetic search, as described below. Problemistic search occurs when senior managers realize that there are problems to be solved, and is measured by the difference between hospitals’ current performance and expected performance. Slack search is motivated by financial surplus, which arises excess capital resource that allows managers to make investments; this is captured by the liquidity of hospitals’ financial performance. Institutionalized search is routine-based, temporally stable investments which is measured by the one-year lagged IS investment intensity of the organization. Finally, mimetic search is the imitation of the investment done by peer organizations, and is captured by the IS investment intensity of a reference group.
The paper empirically proves that problemistic search, institutional search and mimetic search are three mechanisms that directly lead to IS investment. It also proposes a moderating role of regulative legitimacy, and shows that slack search, institutional search and mimetic search indirectly determine IS investment, through the moderation of regulative legitimacy.
Week 11_Mithas and Whitaker (2007)_Xinyu
Is the World Flat or Spiky? Information Intensity, Skills, and Global Service Disaggregation
Service Disaggregation driven by information technology has been studied on industry, firm and plant level. Yet, none has taken the angle of occupation on individual level to understand the determinants of global service disaggregation. This paper thus extend the previous research on service activities by proposing a positive relationship between information intensity and service disaggregation potential, driven by IT. Furthermore, it hypothesizes that the positive effect of information intensity on disaggregation potential is mediated through three characteristics of occupations: codifiability, standardizability, and modularizability. Considering the important role of skill level of occupation, the paper also posits that the skill level has both direct and indirect negative impact on those three characteristics and disaggregation potential. Finally, the necessity of physical presence is posited to reduce the potential of service disaggregation.
The paper provides empirical evidence by using a combined dataset from different sources, which contains more than 300 occupations. Most of the key variables are manually coded and self-verified. An OLS model is applied as the main model, and an ordered probit model is used for robustness check. The results support the direct positive effect of information intensity on disaggregation potential, as well as partial mediating effect only by modularizability. Also, a mixed support of occupational skill level arises. The findings point out what make service occupations easy to be disaggregated and explains the mechanism behind this causality.
Proposal_Xinyu Li
Week 9_IT and Administrative Efficiency_Xinyu
Information Technology and Administrative Efficiency in U.S. State Governments: A Stochastic Frontier Approach
Unlike in for-profit business, where the value of IT has been studied by a large body of literature, in public sector, whether IT makes contribution to government performance is unknown. Therefore, this paper examines the relationship between IT spending and government performance. However, due to the different nature of firm and government, the performance measurements widely used in prior literature based on production function become invalid in the context of government. So this paper specifically investigates whether IT investment is associated with cost efficiency of state governments.
To measure the dependent variable, cost efficiency, the paper employs a stochastic frontier analysis with cost function. This method derives a cost frontier, which describes a minimum level of inputs, given certain amounts of outputs. After that, the cost efficiency is regressed respectively on two IT spending measurements with a two-year lag in a fixed-effect regression model, along with multiple control variables. Furthermore, the paper tests three moderators on the efficiency returns to IT spending. Those three moderators represent contextual effects from economic aspect, demographic aspect, and political aspect.
The results indicate IT spending is positively and significantly associated with government cost efficiency. This main conclusion is consistent through robustness checks. The paper mentions that, numerically, one dollar IT spending will lead to 1.13 dollar cost saving, on average. In addition, three moderating effects are all verified, indicating that the efficiency return to IT spending will be impacted by some environmental factors.
Week 8_Huang et al. (2013)_Xinyu
Appropriability Mechanisms and the Platform Partnership Decision: Evidence from Enterprise Software
The efficacy of intellectual property rights (IPR) as a mechanism to appropriate the returns from innovation has been studied with mixed empirical findings. Following prior literature, this research examines whether ownership of IPR and downstream capabilities such as marketing capability is an effective mechanism to encourage the owner of innovation (or so-called ISV) to join proprietary platform and prevent platform owner to expropriate the innovation. The study is conducted in the environment of software industry, and SAP is the software platform investigated.
The paper proposes that both of the two anti-expropriation mechanisms will increase the probability of ISV partnering with the software platform. It also propose that strong downstream capabilities, therefore, will weaken the value of intellectual property protection mechanism. Finally, it posits the value of IP protection will be enhanced if the markets served by the ISV grow rapidly. In this research, partnership with software platform is indicated using a binary data based on ISVs’ decision to become certified by a platform or not. Downstream capabilities is measured by trademarks and consulting services, and market growth is measured by sales growth. The primary model is built upon a survival model. However, for the purpose of robustness check, it also use generalized estimating equation model and linear probability model with fixed effects, as well as alternative measurement for key variables. Three hypotheses are all verified.
Week 7_Langer et al. (2014)_Xinyu Li
In this paper, Practical Intelligence (PI), a concept from cognitive psychology as a supplement of academic intelligence, is proposed to be a critical factor for Project Managers (PM) to make their projects successful in software offshore outsourcing. Based on an information processing perspective, the paper posits that the PMs’ PI is positively related to project performance. Meanwhile, it also hypothesize that the PI-performance relationship is positively moderated by project characteristics categorized as project complexity (software size and schedule compression) and team complexity (team size and team dispersion), and negatively moderated by task familiarity (PM-task familiarity and team-task familiarity) and stakeholder familiarity (team member familiarity and PM-client familiarity).
This research adopts a mixed methodology to conduct empirical analyses. It obtains PI data of 209 PMs in a software service company through case studies, combined with dataset from the company’s archive data containing characteristics for each of the PMs and the projects they led. Proposed moderators are derived from the dataset using different analytic tools and models. The dependent variable project performance is measured separately by cost performance and client satisfaction.
The results from an OLS and SUR model verify the main effect of PI on project performance as well as most of the moderating effects. With certain limitation such as a progressive learning bias of PI, the paper contributes to related literature by 1) introducing and conceptualizing PI as an important capability for PMs, 2) identifying the characteristics of project context that moderate the PI effect on project performance, and 3) providing sufficient empirical evidence.
Week6_Xue et al (2010)_Xinyu
Driven by the contradictory empirical findings from extant literature, Xue et al. (2010) seeks to answer the question about the relationship between environmental uncertainty and centralization/ decentralization of IT governance. Because IT governance can be multidimensional constructs, to gain a better understanding of the relationship, this paper only focus on IT infrastructure governance.
Most of the prior research suggests environmental uncertainty will increase the decentralization of IT infrastructure governance because decentralization improves flexibility and responsiveness of business units which are crucial in uncertain environments. However, other theories such as agency theory suggests that decentralization in highly uncertain environments increases headquarters’ monitoring and evaluation costs, and also prevents efficient coordination and resource sharing among different business units. Therefore, this paper proposes a curvilinear relationship between environmental uncertainty and IT infrastructure governance, in which decentralization will increase as uncertainty moves from low to intermediate but will decrease as uncertainty moves from intermediate to high. In addition, the paper also proposes that the curvilinear relationship will be strengthened when business units and their headquarters are in unrelated business.
The unit of analysis in this study is business unit. There are three main constructs. The IT infrastructure governance is measured by a binary variable indicating whether the majority of IT infrastructure decisions are made by business unit managers. Environmental uncertainty is conceptualized by three dimensions—dynamism, munificence and complexity. Business unrelatedness is measured as the difference between a business unit and its headquarters’ NAICS industry codes. The model is constructed using a logistic regression. Both the curvilinear relationship between environmental uncertainty and IT infrastructure governance and the moderating effect of business unrelatedness are empirically confirmed.
Function Point_Xinyu
Please refer to the link below to see what Function Point (FP) is and how it works.
Week5_Bank and Slaughter (2000)_Xinyu
Banker and Slaughter (2000) initiates an effort to study the link between software design decisions and software enhancement outcomes. They examine under what conditions software structure is more beneficial than other conditions in terms of reduced enhancement costs and errors.
In specific, they introduce software structure as a moderator of the relationship between software enhancement outcomes and two properties of software, namely software volatility (the frequency of enhancement per unit of functionality) and total data complexity (the number of data elements per unit of functionality). While software volatility and total data complexity are proposed to be positively associated with software enhancement outcomes for intuitive reasons, higher levels of software structure are proposed to mitigate those impacts on the enhancement outcomes. This is because structured software allows maintainer to focus particular issues on only the particular parts after getting familiar with the software through the practice of frequent enhancement, and structured software can be easily simplified by structural decomposition, thus the enhancement costs and errors will be reduced. However, since excessively high levels of structure are also redundant and problematic, the paper also discusses optimal levels of structure for different types of software applications.
The empirical results confirm that higher levels of structure are more advantageous for software with higher volatility and complexity, in terms of reducing enhancement costs and errors. Empirical evidence also shows that the optimal level of structure increases with software volatility and complexity. Finally, the paper identifies application type as an indicator for predicting future volatility and complexity, so that an optimal level of structure can be achieved at an early stage.
Week4_Tanriverdi and Uysal (2011)_Xinyu
Tanriverdi and Uysal (2011) theoretically develop and empirically validate the idea that the cross-business information technology integration (CBITI) capability of an acquirer is an important value-creation mechanism in mergers and acquisitions.
The paper proposes that CBITI capability create acquirer value through 1) IT cost savings, 2) minimization of potential disruption to business operation, 3) realization of business synergy, and 4) reduction of regulatory costs. Based on prior literature, the CBITI capability is measured by five dimensions of the IT integration of acquirer and target firms, and the data is collected from a survey published in Tanriverdi (2006). The value created in mergers and acquisitions is divided into short-run market-based value and long-run accounting-based value, which are observed through event study methods on capital market and firms’ operating performance, respectively. The value creation is proposed to be moderated by the industry relatedness between acquirer and target firms, which is also measured by the survey.
The findings indicate that, in the short run, acquirers with high levels of CBITI capability receive positive and significant abnormal returns on the capital markets. In the long run, acquirers with high levels of CBITI capability obtain significantly higher abnormal operating performance. However, the moderating effect of industry relatedness is only found in the long run scenario.
It is the first paper that link the construct of CBITI with mergers and acquisition performance.
Week3_Dewan and Ren (2011)_Xinyu Li
Prior literature states that the key to unlock the business value of IT lies in the synergy between IT investment and business strategy. Motivated by this idea, Dewan and Ren (2011) emphasizes the influence of firm boundary on the link between IT investment and firm performance. Their work differs from the previous studies in that they 1) focus on the role of the interaction between IT investment and firm strategy, 2) distinguish firms’ financial performance into return and risk, 3) classify IT investment by the nature of IT investments. The uniqueness affords their work the ability to explain the unsolved “profitability paradox”.
The paper firstly looks at how the boundary of firms moderates the relationship between IT investment and firm performance (return and risk). Two dimensions of the boundary—horizontal integration (diversification) and vertical integration—are discussed respectively. Since one major function of corporate IT is to facilitate coordination, the paper hypothesize that diversification positively moderates the link between IT investment and financial return. Likewise, it negatively moderates the IT-risk link because internal learning tend to reduce uncertainty brought by IT. Related diversification benefits more than unrelated diversification due to less coordination required by unrelated diversification. By the same token, the paper propose that vertical integration will decrease the influence IT investment has on financial risk. However, whether an IT investment is externally oriented should be taken into account when considering the moderating effect of vertical integration on the link between IT investment and financial return. Finally the paper also compares the moderating impact based on other firm characteristics such as service versus manufacturing, high IT-intensity versus low IT-intensity, recent time periods versus older time periods. All of the hypotheses are verified by empirical investigation. Robustness checks are also provided using different measurements of key independent variables and dependent variables.
Week2_Rai et al. (2012)_Xinyu
While much of the literature has studied the the business value of IT within a firm, limited knowledge has been explored on the cocreation of relational value between collaborative firms using interfirm relationship as a unit of analysis. Based on the relational view, Rai et al. (2012) sought to theorize interfirm IT capability and examine how this capability as well as interfirm communication help cocreate relational value.
This paper proposed that higher relational value is associated with more sophisticated interfirm IT capability profiles and more interfirm communications. The paper used the share of wallet and loyalty to represent the construct of relational value. To develop interfirm IT capability profiles, four IT functionalities were firstly distinguished in logistics industry, which is the investigative context in the paper—Single-location Shipping, Multilocation Shipping, Supply Chain Visibility and Financial Settlement. From low to high, these four IT functionalities represent different sophistication levels of interfirm IT implementation and usage to manage interdependencies in interfirm business processes. Drawn upon the four functionalities, four interfirm IT capability profiles were developed to characterize different generics of interfirm relationships, namely Logistics Automation, Logistics Coordination, Logistics Integration and Logistics Synchronization. Interfirm communications were also classified into communication for business development and communication for IT development, which were measured respectively by how frequent buyers’ executives talk to logistics firms’ account executives and IT executives.
The key results of the paper is that both interfirm IT capability profiles and interfirm communications individually and jointly support the cocreation of interfirm relational value. Meanwhile, it theorized IT capability profiles which can be formed by implementing and using sets of progressively more advanced IT functionalities. It also introduced and justified share of wallet and loyalty as two measurements of interfirm relational value cocreation.