An Investigation of the Effects of It Investment on Firm Performance: the Role of Complementarity
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AN INVESTIGATION OF THE EFFECTS OF IT INVESTMENT ON FIRM PERFORMANCE: THE ROLE OF COMPLEMENTARITY A Dissertation SUBMITTED TO THE GRADUATE FACULTY in partial fulfillment of the requirements for the degree of Doctor of Philosophy By Yong-Mi Kim Norman, Oklahoma 2005 UMI Number: 3203278 UMI Microform 3203278 Copyright 2006 by ProQuest Information and Learning Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. ProQuest Information and Learning Company 300 North Zeeb Road P.O. Box 1346 Ann Arbor, MI 48106-1346 AN INVESTIGATION OF THE EFFECTS OF IT INVESTMENT ON FIRM PERFORMANCE: THE ROLE OF COMPLEMENTARITY A Dissertation APPROVED FOR THE Michael F. Price College of Business (Division of Management Information Systems) BY _______________________________ Dr. Robert W. Zmud _______________________________ Dr. Shaila Miranda _______________________________ Dr. Laku Chidambaram _______________________________ Dr. Richard L. Van Horn _______________________________ Dr. Rajeev Sharma _______________________________ Dr. Richard Johnson © Copyright by Yong-Mi Kim 2005 All Rights Reserved ACKNOWLEDGEMENTS I am indebted to many people for their assistance and insight which enabled me to successfully complete this dissertation. I greatly appreciate my dissertation chair, Dr. Robert W. Zmud. He was involved with this dissertation since the earliest stages of idea development and helped me to articulate this concept into a dissertation topic. Dr. Zmud was so patient in directing the dissertation and in communicating complicated ideas to me in easy ways. His exceptional knowledge and guidance made this journey much easier and a valuable learning process. Dr. Zmud was also very generous with his time and advice in providing insightful comments on my dissertation and other projects. He also taught me how to be a good professor. The successful completion of this dissertation is also attributed to Dr. Shaila Miranda, co- chair of this dissertation. She was dedicated to this project and was always willing to spend extra time and provide valuable comments. She always made my dissertation a priority, helping me to stay on the right track and make good progress. Since I met her in the fall of 2000, Dr. Miranda has been an exceptional mentor and academic advisor, as much as anyone could ever ask for. I have enjoyed our working relationship and would like to continue working with her in the future. Without her support and encouragement, this journey would have been a much more difficult one. I also appreciate the support I received from Dr. Laku Chidambaram, a committee member. He was very supportive of my dissertation and very instrumental in my academic career. His comments and insights were invaluable in development of this iv dissertation. I also enjoyed his warm and caring character and his genuine concern for and willingness to help others. Dr. Chidambaram taught me the importance of a caring character and good friendships in addition to the importance of an academic career. I am also indebted to Drs. Rajeev Sharma, Rick Johnson, and Richard Van Horn, committee members who provided valuable comments regarding research methods and statistical analysis. Dr. Sharma read the dissertation thoroughly and provided much appreciated suggestions on the research model and statistical analyses. Likewise, Dr. Johnson provided insightful comments regarding the data and data analyses. Dr. Van Horn provided important insights that one could easily overlook at the proposal defense. Lastly, I have earned invaluable friendships since I joined the program. Richard Rubin (Florida Atlantic University), Alexis Downs, Leslie Albert, Rui Huang, Jeff Crawford, Andre Araujo, and Wil Wu have made my academic life much easier by sharing happiness, problems, and difficulties. I appreciate, especially Leslie and Rui, for taking time out of their busy schedules to help me with this dissertation. I am very grateful to all of my friends and for the opportunity to share my academic life with them. I’d like to continue our friendship well into the future. v TABLE OF CONTENTS CHAPTER I: INTRODUCTION 1.1. Research on IT Productivity------------------------------------------------------------------- 1 1.2. Overview of Study Context ------------------------------------------------------------------- 5 1.3. Research Questions ----------------------------------------------------------------------------- 6 1.4. Organization of Dissertation ------------------------------------------------------------------ 6 CHAPTER II: LITERATURE REVIEW 2.1. IT Investments and Firm Performance ·································································10 2.1.1. Technological Imperative: National-level Studies·················································11 2.1.2. Technology Imperative: Industry Level·································································12 2.1.3. Technology Imperative: Firm Level ······································································12 2.1.4. Technological Imperative: Intermediate Processes ···············································17 2.1.5. Technological Imperative: Application Level ·······················································19 2.1.6. Organizational Imperative: Firm Level ·································································21 2.1.7. Summary of IT Investments and Firm Performance··············································23 2.2. Complementary Investments and Firm Performance ···············································24 2.3. Complements of IT Investments ·············································································32 2.3.1. Design Rules ···········································································································32 2.3.2. Relationships ···········································································································36 2.3.3. Education and Training ···························································································41 2.3.4. Summary of Complementarity Investments and Firm Performance ·······················43 2.4. Enterprise-Level IT Management Capability ··························································44 vi 2.4.1. Top Management’s Commitment to IT ·································································46 2.4.2. IT Management Capability ····················································································49 2.4.3. Strategic Alignment ······························································································51 2.4.4. Summary of Enterprise-Level IT Management Capability ···································53 2.5. Industry Strategic IT Role ························································································54 2.5.1. Summary of Industry Strategic IT Roles ······························································56 2.6. Summary of Literature Review·················································································56 CHAPTER III: A KNOWLEDGE-BASED VIEW OF COMPLEMENTARITY 3.1. Investment-Related Capabilities ················································································60 3.1.1. Foundational Capabilities ························································································60 3.1.2. Synergistic Capabilities ···························································································61 3.1.3. Management Capabilities·························································································62 3.2. Investment-Specific Capabilities ················································································62 3.2.1.1. Artifactual Capital·································································································63 3.2.1.2. Structural Capital ··································································································63 3.2.1.3. Social Capital ·······································································································64 3.2.1.4. Community Capital·······························································································64 3.2.1.5. Human Capital ······································································································65 3.2.2. Investment-Specificity of Forms of Capital: SCM and CRM Contexts ·················66 3.3. Summary of a Knowledge-Based View of Complementarity ···································69 vii CHAPTER IV: RESEARCH MODEL AND HYPOTHESES 4.1. The Nature of Complementarity in IT Investments····················································70 4.2. Investment-Specific Capabilities ················································································72 4.2.1. Structural Capital ····································································································72 4.2.2. Social Capital···········································································································73 4.2.3. Community Capital··································································································74 4.2.4. Human Capital ·········································································································75 4.3. Investment-Related Capabilities ················································································77 4.3.1. Foundational Capabilities ························································································77