Week 4 Reading Summary – Chi et al.(2010) – Xi Wu

Chi et al. (2010). Information technology, network structure, and competitive action. Information Systems Research, 21(3), 543-570.

Researchers in competitive dynamics have demonstrated that firms that carry out intense, complex, and heterogeneous competitive actions exhibit better performance. However, there is a need to understand factors that enable firms to undertake competitive actions. This study focuses on the sparse-versus-dense network structure of inter-organizational networks and aim to theoretically and empirically investigate how these contrasting types of network structure interact with IT to influence firm competitive behavior. They argue that firms could benefit from both types of network structure, but the extent to which they exploit their network positions is contingent upon their use of IT.

This paper extends the AMC framework to the action repertoire level of analysis by examining how a firm’s network structure interacts with its use of IT system to jointly influence the firm’s competitive behavior through increasing the firm’s awareness of opportunities for developing new competitive actions and its capability and motivation to act on the opportunities.

They tested the hypotheses on a sample of firms from the global automobile industry, about 12 major automakers over 16 years from 1988 to 2003. They find that network structure rich in structural holes has a positive direct effect on firms’ ability to introduce a greater number and a wider range of competitive actions. However, the effect of dense network structure is contingent on firms’ IT-enabled capability. Firms benefit from dense network structure only when they develop a strong IT-enabled capability. Our results suggest that IT-enabled capability plays both a substitutive role, when firms do not have advantageous access to brokerage opportunities, and a complementary role, when firms are embedded in dense network structure, in the relationship between network structure and competitive actions.