«Researchers have endeavored to increase understanding of the relationships between investments in information systems (IS), competitive advantage, ...»
Alternately, the competitive dynamics literature stream has focused upon the competitive actions and/or responses in which firms engage to ultimately improve relative firm performance (e.g., Chen & Hambrick, 1995; Chen & Miller,1994; Derfus, Maggitti, Grimm & Smith, 2008; Ferrier, 2001; Ferrier, Smith & Grimm, 1999; Porter, 1980; Smith, Grimm, Gannon & Chen, 1991; Young, Smith, & Grimm, 1996). These studies focus upon such issues as the manner in which competitive behavior for small firms differs from large firms, competitive attack and retaliation, focal firm actions versus rival firm actions, and characteristics of sequences of actions. While existing studies from both information systems and competitive dynamics literature have provided valuable insights and contributions to theoretical development, neither field of study has regarded the role of information systems in the context of specific competitive actions undertaken by firms and resulting impacts upon firm performance.
The results from Study I of this dissertation highlight this significant gap in both streams of literature by identifying the critical role of information systems in the context of firms‘ competitive actions toward firm performance. Specifically, Study I found that
knowledge sharing, and decision-making in the context of competitive dynamics, and they depend upon information systems to provide the mechanism for collaboration and collective decision-making in conceiving, enacting and executing competitive actions to improve relative firm performance. The findings in Study I are significant, as traditional economic interpretations of interactions between people assume rational, self-interested behavior affected minimally by social relations (Powell, Koput, Smith-Doerr, & OwenSmith, 1999). Study I, however, supports and extends Granovetter‘s (1973; 1985) idea of social embeddness of economic activities.
Accordingly, Study II follows Granovetter‘s (1973) view that the need for a series of strong and weak relationships among people creates a network of interdependencies among people to form social structures. Thus, Study II attempts to explicate the linkages between network ties, competitive dynamics, and firm performance by suggesting that social computing and communications technologies, or the use of technology in the formation of social structures (Schuler, 1994; Vannoy & Palvia, Forthcoming), plays a significant role in the relationships or ―ties‖ among managers engaged in conceiving, enacting and executing competitive actions or competitive responses. Social computing and communications technologies provides a platform for organizational communication and information and knowledge exchange among managers, and provides opportunities for action on the part of managerial social network participants in relation to the competitive actions and responses undertaken by the firm.
Given the aforementioned discussion based on extant literature and the importance of the role of information systems in the context of competitive dynamics and firm performance, the following two research questions are put forward in this dissertation.
The following research question is addressed in Study I of this dissertation: How do managers, in a dominant firm, interpret the role of information systems in the process of conceiving, enacting and executing competitive actions to improve relative firm performance?
The following research question is addressed in Study II of this dissertation: How do managers in a dominant firm utilize intrafirm social computing networks and communications technologies in conceiving, enacting and executing competitive actions and responses to improve relative firm performance?
Answering the two aforementioned research questions provides an in-depth perspective about a very complex and multifaceted phenomenon: understanding the impact of information systems on firm performance through the lens of competitive dynamics.
1.5. IRB Approval The protocol of this research has been approved by Institutional Review Board of University of North Carolina at Greensboro. The original protocol number is 078295 and has been extended to incorporate Study II. The protocol number for the extended research is 07-0295.
Of interest in Study I is the impact of information systems on firm performance through the specific competitive actions in which a firm engages. Richard, Devinney, Yip, and Johnson (2009) suggest that, ―Measuring [organizational performance] is essential in allowing researchers and managers to evaluate the specific actions of firms and managers, where firms stand vis-à-vis their rivals, and how firms evolve and perform over time‖ (p. 719). The research question in Study I is as follows: How do managers, in a dominant firm, interpret the role of information systems in the process of conceiving, enacting and executing competitive actions to improve relative firm performance?
Answering this question begins with a review of relevant literature.
2.1. Literature Review To begin to understand the complex phenomenon under study and in the context of managerial interpretations, the following streams of research are examined and synthesized: information systems and firm performance, competitive dynamics and firm performance, and interpretive sociology.
2.1.1. Information Systems and Firm Performance. Information systems research has endeavored to increase understanding of the relationships between investments in information systems (IS), competitive advantage and firm performance
rigorous research investigating the returns of IS investment on firm performance (Brynjolfsson 1993; Brynjolfsson & Hitt, 1998; Malone, 1997), most researchers agree that competitive advantage is difficult to achieve based upon the acquisition of technology alone (Carr, 2003; Wade & Hulland, 2004). Thus, many IS researchers have begun to examine information systems, competitive advantage and firm performance using such theories as the resource based view of the firm (Barney, 1991; Barua et al.
2004; Bharadwaj, 2000; Mithas et al. 2004; Sambamurthy et al. 2003; Wernerfelt, 1984), the knowledge-based view of the firm (Alavi & Leidner, 2001; Grant, 1996; Kearns & Sabherwal, 2007; Kogut & Zander, 1992), and the concept of fit, from information processing theory (Francalanci & Galal, 1998; Gattiker & Goodhue, 2004; Kim et al., 2006; Premkumar et al., 2005; Umanath, 2003).
Barney (1991) posits that a firm‘s resources can take many forms, including assets, as well as capabilities and knowledge. The resource-based view of the firm suggests that firms can achieve competitive advantage through the resources they possess. However, in order for competitive advantage to be realized, such resources must be valuable, rare, inimitable, highly immobile, and heterogeneously distributed across firms (Barney, 1991). Such resources can give a firm a competitive advantage, at least for some period of time. This competitive advantage can be sustained for longer periods of time if the firm is able to protect it against rivals. When resources become possessed by competing firms, they can no longer provide competitive advantage. A resource is mobile if other firms can take possession of the resource at no particular cost
without significant associated costs, the firm holding the resource can benefit from sustained competitive advantage by holding that resource. Jarvenpaa and Leidner (1999) suggest that the resource based view perspective is the predominant theory used in information systems research to understand competitive advantage in firms.
Wade and Hulland (2004) suggest that one of the significant challenges to information systems researchers with regard to the resource based view is the difficulty in defining exactly what is meant by ―resource,‖ positing that researchers have applied the resource based view in a wide range of contexts, ranging from IT capabilities to IT skills to IT assets, creating a difficult foundation from which to build theories and research.
Asset-based resources may be physical or tangible resources, human resources, or organizational resources (Barney, 1991), while capabilities develop over time within a firm-specific context, and require firm-specific investment (Teece et al. 1997).
Interestingly, the resource-based view is relatively silent when it comes to firms‘ competitive dynamics, or the specific competitive actions and reactions in which a firm engages to attain or retain competitive advantage. This is a significant gap in current research, given that Porter (1980) suggests that the very reason firms engage in competitive dynamics is to gain competitive advantage. Furthermore, the strategic process by which top managers design the structure and composition of a firm‘s competitive repertoire (set of competitive actions), (conceive), endorse a particular action (enact), or carry out (execute) a competitive action remains unclear. Additionally, the firm‘s competitive repertoire is not a static event. Competitive action formulations,
competitive advantage and for impacts upon firm performance, but to date little empirical knowledge exists about the conception, enactment and execution of firms‘ competitive actions and reactions.
Other researchers have used the knowledge-based view of the firm (Alavi & Leidner, 2001; Grant, 1996; Kearns & Sabherwal, 2007; Kogut & Zander, 1992) in their quest to examine the relationship between information systems, competitive advantage and firm performance. This perspective suggests that firms achieve competitive advantage from IS capabilities and information and knowledge resources that are embedded and integrated within organizational structures and routines. The resourcebased view of the firm suggests that resources that are highly immobile (hard to transfer to other firms) can provide sustainable competitive advantage. Grant (1996) suggests that firm-specific knowledge provides such a resource. Furthermore, firm-specific knowledge resources are socially complex within the organizational context, non-imitable and heterogeneously dispersed across firms. Grant (1996) suggests that one of the very reasons that firms exist is to create, share and integrate knowledge. The ability of a firm to capitalize upon its knowledge-based resources is central to the firm‘s ability to compete (Nonaka, 1994). Knowledge-based resources may be explicit or implicit (Kogut & Zander, 1992), with explicit knowledge being in a codified or articulated form making it more transferable but not necessarily applicable outside the boundaries of the firm.
Tacit knowledge, however, exists only within the context of the organization (Simon, 1991), and may be embedded within individuals who then become firm-specific
and knowledge gained over time within the context of the firm (Kogut & Zander, 1992;
Simon, 1991). Tacit knowledge is not codified, complex to learn and difficult to diffuse in foreign situations (Kogut & Zander, 1992). As such, it has been suggested that firm specific knowledge is a highly immobile, inimitable resource of firms that may provide sustainable competitive advantage. Alavi & Leidner (2001) posit that information systems play an integral role with regard to the management of knowledge-based resources in organizations.
Similar to current utilization of the resource-based view, studies utilizing the knowledge-base view have largely ignored the context of firms‘ competitive dynamics.
Provided that a firm‘s competitive actions bring competitive advantage (Porter, 1989;
Smith et al., 1989), this is a notable gap in current literature, given the acknowledgement of the importance of the role of information systems in the management of knowledge resources and that knowledge has been expounded as one of a firm‘s most strategically important resources (Alavi & Leidner, 2001).
Other studies have examined the relationship between information systems, firm performance and competitive advantage through evaluating the effectiveness of the fit between an organization‘s information processing needs and its information processing capabilities (Francalanci & Galal, 1998; Gattiker & Goodhue, 2004; Kim et al., 2006;
Premkumar et al., 2005; Umanath, 2003). This stream of research suggests it is the fit between needs and capability that can bring competitive advantage and improvements in
notion of fit as it relates to firms‘ competitive actions and responses.
2.1.2. Strategic Management and Competitive Dynamics. A fine-grained and dynamic view of strategy focusing on competitive actions and competitor responses has been advocated in the strategic management literature (Bettis & Weeks, 1987; Chen et al., 1991; MacMillan et al., 1985; Smith, Grimm, Chen, & Gannon, 1989). This perspective follows Porter‘s (1980) definition of strategy as the undertaking of competitive moves to achieve competitive advantage. Ferrier (2001) has suggested that firms enact competitive actions in efforts to improve relative firm performance.
Consistent with Shumpeter‘s (1934, 1950) analysis, Smith et al. (1991) have defined competitive action as ―a specific and detectable competitive move, such as a price cut or new product introduction, initiated by a firm to defend or improve its relative competitive position‖ (p.61) and have similarly defined a competitive response as ―a clear-cut and discernable counteraction taken by a competing firm with regard to one or more competitors to defend or improve its position‖ (p. 61).
Miller (1993) suggests that firms will engage in competitive tactics to improve relative performance. Such tactics include the struggle for market share through price cuts and advertising campaigns (Vilcassim, Kadiyali, & Pradeep, 1999), new product development (Banbury & Mitchell, 1995), new market entry (Ferrier, Smith, & Grimm, 1999; Makadok, 1998), and competitive differentiation (Caves & Ghemawat, 1992).
Firms may engage in competitive actions that have proven successful or develop new competitive actions when past actions become ineffective (Miller, 1990) or were found to