Deriving Business Value from IT Applications in Product Development: A Complementarities-Based Model

Many companies that have made considerable investments in IT applications to support their product development activities have realized limited value from such efforts. In this chapter, we argue that a deep understanding of the complementarities that exist in the product development context is critical to ensure that business value is derived from the IT applications. We propose a multi-level complementarities-based model of IT innovation and business value to explain the factors that shape the success of IT-enabled product development. Our model posits that firms will obtain more value from innovative IT investment initiatives when the resulting IT applications are fitted into a system of initiative or product development context-specific complementary organizational elements (strategies, structures, processes, etc.). Further, firms will get more value from IT initiatives when investment is combined with certain firm-level elements such as a business strategy that is especially amenable to IT support, strong IT capabilities, and a modern organizational architecture that incorporates a cluster of practices associated with “digital” organizations. The model can guide researchers and managers in identifying the firm-level pre-conditions for realizing value from investments in IT to support product development and specifying necessary complementary investments in organizational change associated with product development.

[1]  Peter Weill,et al.  The Relationship Between Investment in Information Technology and Firm Performance: A Study of the Valve Manufacturing Sector , 1992, Inf. Syst. Res..

[2]  E. Rogers,et al.  Diffusion of Innovations , 1964 .

[3]  W. Orlikowski,et al.  Windows of Opportunity: Temporal Patterns of Technological Adaptation in Organizations , 2011 .

[4]  Marc H. Meyer,et al.  The Power of Product Platforms , 1997 .

[5]  Toni M. Somers,et al.  The Impact of ERP Implementation on Business Process Outcomes: A Factor-Based Study , 2007, J. Manag. Inf. Syst..

[6]  Prabhudev Konana,et al.  Antecedents and Consequences of Internet Use in Procurement: An Empirical Investigation of U.S. Manufacturing Firms , 2007, Inf. Syst. Res..

[7]  A. Adam.  Whatever happened to information systems ethics? Caught between the devil and the deep blue sea , 2004 .

[8]  K. Peffers,et al.  Rewards to Investors in Innovative Information Technology Applications: First Movers and Early Followers in ATMs , 1995 .

[9]  D. Leonard-Barton,et al.  Implementation as mutual adaptation of technology and organization , 1988 .

[10]  Gordon B. Davis,et al.  User Acceptance of Information Technology: Toward a Unified View , 2003, MIS Q..

[11]  Anandhi S. Bharadwaj,et al.  A Resource-Based Perspective on Information Technology Capability and Firm Performance: An Empirical Investigation , 2000, MIS Q..

[12]  Paul Milgrom,et al.  Complementarities and fit strategy, structure, and organizational change in manufacturing , 1995 .

[13]  R. Cooper,et al.  Portfolio management for new product development: results of an industry practices study , 2001 .

[14]  M. Markus,et al.  Banking on information technology: converting IT spending into firm performance , 1993 .

[15]  K. Ramamurthy,et al.  Organizational and Interorganizational Determinants of EDI Diffusion and Organizational Performance: A Causal Model , 1999, J. Organ. Comput. Electron. Commer..

[16]  E. Brynjolfsson,et al.  Paradox Lost? Firm-Level Evidence on the Returns to Information Systems Spending , 1996 .

[17]  D. J. Wu,et al.  Investment in Enterprise Resource Planning: Business Impact and Productivity Measures , 2002, J. Manag. Inf. Syst..

[18]  Sree Nilakanta,et al.  Organizational innovativeness: Exploring the relationship between organizational determinants of innovation, types of innovations, and measures of organizational performance , 1996, Omega.

[19]  N. Venkatraman,et al.  Knowledge relatedness and the performance of multibusiness firms , 2005 .

[20]  Margaret Y. Smith.  A model of the linked adoption of complementary technologies , 2004 .

[21]  Michael W. Grieves,et al.  Product Lifecycle Management: Driving the Next Generation of Lean Thinking , 2005 .

[22]  Christina Soh,et al.  How IT Creates Business Value: A Process Theory Synthesis , 1995, ICIS.

[23]  R. Zmud,et al.  Information technology implementation research: a technological diffusion approach , 1990 .

[24]  Keld Laursen,et al.  New human resource management practices, complementarities and the impact on innovation performance , 2003 .

[25]  Lorin M. Hitt,et al.  Information Technology and Internal Firm Organization: An Exploratory Analysis , 1997, J. Manag. Inf. Syst..

[26]  S. Zahra,et al.  Absorptive Capacity: A Review, Reconceptualization, and Extension , 2002 .

[27]  Kevin Zhu,et al.  The Complementarity of Information Technology Infrastructure and E-Commerce Capability: A Resource-Based Assessment of Their Business Value , 2004, J. Manag. Inf. Syst..

[28]  Rajiv Kohli,et al.  Performance Impacts of Information Technology: Is Actual Usage the Missing Link? , 2003, Manag. Sci..

[29]  Gerardine DeSanctis,et al.  Capturing the Complexity in Advanced Technology Use: Adaptive Structuration Theory , 1994 .

[30]  Vernon J. Richardson,et al.  The Value Relevance of Announcements of Transformational Information Technology Investments , 2003, MIS Q..

[31]  Thomas H. Davenport,et al.  The New Industrial Engineering: Information Technology and Business Process Redesign , 2011 .

[32]  Rajiv Kohli,et al.  Measuring Information Technology Payoff: A Meta - Analysis of Structural Variables in Firm - Level Empirical Research , 2003, Inf. Syst. Res..

[33]  Antti Saaksvuori,et al.  Product lifecycle management , 2004 .

[34]  E. B. Swanson,et al.  Information systems innovation among organizations , 1994 .

[35]  Robert G. Fichman,et al.  Real Options and IT Platform Adoption: Implications for Theory and Practice , 2004, Inf. Syst. Res..

[36]  Erik Brynjolfsson,et al.  The Matrix of Change , 1997 .

[37]  E. Brynjolfsson,et al.  Computing Productivity: Firm-Level Evidence , 2003, Review of Economics and Statistics.

[38]  E. Burton Swanson,et al.  Innovating Mindfully with Information Technology , 2004, MIS Q..

[39]  Paul J. Hart,et al.  Power and Trust: Critical Factors in the Adoption and Use of Electronic Data Interchange , 1997 .

[40]  Kalle Lyytinen,et al.  Attention Shaping and Software Risk - A Categorical Analysis of Four Classical Risk Management Approaches , 1998, Inf. Syst. Res..

[41]  Wanda J. Orlikowski,et al.  Improvising Organizational Transformation Over Time: A Situated Change Perspective , 1996, Inf. Syst. Res..

[42]  Dale Goodhue,et al.  Develop Long-Term Competitiveness through IT Assets , 1996 .

[43]  M. Lynne Markus,et al.  Toward a “Critical Mass” Theory of Interactive Media , 1987 .

[44]  M. Wade,et al.  Review: the resource-based view and information systems research: review, extension, and suggestions for future research , 2004 .

[45]  M. Markus,et al.  Information technology and organizational change: causal structure in theory and research , 1988 .

[46]  Satish Nambisan,et al.  Web Technology Adoption and Knowledge Barriers , 2000, J. Organ. Comput. Electron. Commer..

[47]  Andrew B. Whinston,et al.  The Complementarity Of Mass Customization And Electronic Commerce , 2000 .

[48]  Richard L. Nolan,et al.  Cisco Systems: Web-enablement , 2000 .

[49]  Izak Benbasat,et al.  Predicting Intention to Adopt Interorganizational Linkages: An Institutional Perspective , 2003, MIS Q..

[50]  Russell L. Purvis,et al.  The Assimilation of Knowledge Platforms in Organizations: An Empirical Investigation , 2001 .

[51]  M. Colombo,et al.  Complementarity and cumulative learning effects in early diffusion of multiple technologies , 1995 .

[52]  T. C. Powell,et al.  Information technology as competitive advantage: the role of human , 1997 .

[53]  A. Nerkar,et al.  Technological and product-market experience and the success of new product introductions in the pharmaceutical industry , 2004 .

[54]  Robert D. Austin,et al.  Cisco Systems, Inc.: Implementing ERP TN , 1998 .

[55]  Oscar Hauptman,et al.  Platform leadership , 2002 .

[56]  Kenneth L. Kraemer,et al.  Review: Information Technology and Organizational Performance: An Integrative Model of IT Business Value , 2004, MIS Q..

[57]  Paul R. Milgrom,et al.  The Economics of Modern Manufacturing: Technology, Strategy, and Organization , 1990 .

[58]  Wallace E. Carroll,et al.  The Diffusion and Assimilation of Information Technology Innovations , 2001 .