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.

Since the prior literature on coordination and manufacturing performance has been limited to focusing on a firm’s information systems capability and its integration with supply chain capabilities, the increased role of IT in manufacturing performance and dynamically changing business need require manufacturing and information systems (IS) functions to evaluate IT’s support of business goals and develop new capabilities to support a new dimension of inerfunctional coordination. Bharadwaj et al. (2007) develop an integrative model of manufacturing performance that includes an integrated information systems construct and manufacturing-IS (Mfr-IS) coordination in conjunction with manufacturing-marketing (Mfr-Mkt) and manufacturing-supply chain (Mfr-SC) coordination, providing a more complete picture of the true drivers of manufacturing performance which simultaneously considers the effects of a firm’s integrated IS capability in conjunction with interfunctional and interorganzational coordination mechanisms.

Bharadwaj et al. (2007) also develop a conceptual framework as the following:

Bharadwaj et al. (2007) tests the model by using data collected from a national survey of manufacturers (about 169 firms) and archival manufacturing performance data from COMPUSTAT (about 126 firms). And they use the general system-form of the model to test the hypotheses. In the first step, the responding firms were separated into two groups: firms with scores greater than the mean of the sum of the three coordination variables (coded as one) and firms with scores lesser than the mean of the sum of the three coordination variables (coded as zero). After using a three-stage least-squares analysis, a hierarchical regression analysis and moderated regression analysis, all the hypothesized relationships were statistically significant.

The significant contributions of this study include: (1). Exploring the role of Mfr-Is coordination and integrated IS capability in conjunction with the traditional coordination drivers in explaining manufacturing performance. (2). Presenting an examination of the role of manufacturing-IS coordination in contemporary manufacturing firms.

This paper examine the relationship between interfirm IT capability, interfirm communications and relational value.   Interfirm communications is defined as the exchange of knowledge, ideas, and opinions driven by goals among senior executives in the interfirm relationships. In this study, the interfirm communications for business development and IT development are measured by total number of visits and phone calls in past year between the supplier’s account executives with the buyers on each aspect. Building on the marketing literature, relational value is operationalized as share of wallet and loyalty.

To conduct the empirical study, they use the active relationships between a Fortune 100 logistics supplier and its buyers in the United States.  The findings reveal that IT functionalities, when implemented and used in combination with other resources in the interfirm logistics process (e.g., physical goods, information, and finances across locations), increase relational value. Moreover, higher sophistication of interfirm IT capability profiles would leads to higher relational value. The study also finds interfirm communications for business development can only create relational value with the facilitation of IT capability profiles, whereas interfirm communication for IT development is not found to be contingent on IT capability profiles. As a result, interfirm IT capability profiles have a more substantial role in relational value when relying on interfirm communications for business development.

The contributions of this study include that it theorizes interfirm IT capability profiles as the implementation and use of a set of IT functionalities that combine with other resources to execute interfirm business processes and as a major means for cocreating relational value.  Second, this study stresses the importance of the level of sophistication in implicating the IT capability profiles. The sophisticated IT capability profiles accompanied by interfirm communications for business development can significantly enhance the relationship value.

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.

Information technology, workplace organization and the demand for skilled labor: firm-level evidence

A significant shift in labor demand towards skilled workers in the late 20^th century have been attributed to skill-biased technical changes (SBTC). Quantitative research has made it clear the important role of information technology in SBTC and its direct correlation with skill at the worker, firm and industry level.

Rather than only investing IT for quality improvement and efficiency gains, successful firms reveal preferences to a combination of three related innovation, a) increased use of IT, b) changes in organization practices and c) changes in products and services. Bresnahan et al. (2002) extend the SBTC theory through the rational that decline in price of IT will increase firms’ use of the complementary system of abovementioned three innovation, thereby increasing the relative demand for skilled labor.

Their rational is supported by evidence from archive data, survey and interviews with managers from 300 large U.S firms. Bresnahan and his collegues examine the correlations across firms in the use of hypothesized complements, test a short-run conditional input or technology choice equations and analyze simple production functions. Alternative explanations, such as managerial fad, demand shocks and aggregation error, are shown to be inconsistent with all the empirical results, making their hypothesized rational more reliable and validated.

Their analysis has implications for understanding SBTC. First, it provides new firm-level evidence to show that IT is a source of increased demand for skilled labor and rising wage inequality. Second, it identifies a set of mechanisms by which labor demand is influenced through organizational redesign that calls for complementary investment in IT, work organization and product innovation.

Im and Rai (2014) examine the IOS (interorganizational systems) regarding the impact on relationship performance and quality mediating through contextual ambidexterity. The authors support that the enhancement of contextual ambidexterity leads to better relationship performance and quality. The rationale is that contextual ambidexterity helps partners align resources and actions and that it leads them to adapt the relationship to broader changes.

This positive association is manifested through 3 sets of findings. First, OSS use cultivates contextual ambidexterity on the customer side while the vendor sides enjoy more positive benefits with longer duration of relationship. This is possibly because OSS places a greater resource burden and hold-up risk on the vender.

Second, ISS use fosters the benefits to both of the sides while the benefit of the customer is not significant as the relationship ages. This finding seems to support the contextual knowledge that accumulated over time becomes more valuable for the vendor.

Third, interdependent decision making facilitate the benefits on both of the sides, but the duration does not moderate the effect, implying that the synergies between alignment and adaption show up even from the early period.

In conclusion, contextual ambidexterity enables IORs (interorganizational relationships) to achieve performance benefits and enhances relationship quality from the perspectives of both customers and vendors; IT-enabled coordination mechanisms and interdependent decision making promote contextual ambidexterity on the side of customers. IORs accumulate relationship-specific resources that are instrumental in leveraging OSSs and ISSs to achieve synergies between alignment and adaptation for the vendor. All in all, IS use at both the operations and sensemaking levels plays a major role in enabling contextual ambidexterity and increasing the value derived from IORs for both the vendor and the customer.

The Extroverted Firm: How External Information Practices affect innovation and productivity

This paper proposes that IT are most productive when they allow firms to quickly respond to external information, such as customer interaction, benchmarking and using inter-organizational project teams. And it empirically proves that external focus, decentralization, and IT intensity are associated with productivity in modern firms.

The paper uses survey-based data from 253 firms to examine the hypothesis. At first, authors calculate correlations between organizational practices and IT measurements and gives the preliminary results that external focus, internal workplace organization and IT usage are complements in the production process. Then the paper tests the relationship between Innovation and various stage of the product development and found that firms’ ability to capture information from its environment is positively associated with product leadership and effective management of the product line. Then, the paper uses the full-sample data to test the complementarities in production. The OLS model contains the three-way interaction term of external focus, IT, and decentralization. The results show that the effect of IT on firm productivity is significant when the external focus and decentralization are matched in the either direction.

Another important point in this paper is the robustness check. The paper uses organization inhibitors as instrumental variables in the innovation and product development regressions because these variables may affect the costs firms face in adopting new organizational firms, as well as they are not directly correlated with firm performance. The results still hold when the models include instrumental variables and use other measures of the organizational practices.

This paper has rich implications. The firms that can better utilize their environment may outperform their competitors and external focus is distinct from organizational decentralization. It also helps to explain the fact that firms operated in information rich environments tend to have higher returns of IT investments.

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