The Impacts of IT on Firm and Industry Structure: The Personal Computer Industry

The Impacts of IT on Firm and Industry Structure: T HE P ERSONAL C OMPUTER I NDUSTRY Jason Dedrick Kenneth L. Kraemer he use of information technology (IT) is thought to have wide- ranging consequences for the organization of economic activities within firms and across firm boundaries. The adoption of IT within firms has been closely associated with organizational changes such as process restructuring and the elimination of layers of management. 1 As com- panies have applied IT to improve their internal processes, they also have devel- oped interorganizational systems (IOS) linking suppliers, customers, and business partners to improve efficiency throughout the value chain. 2 The Internet has increased the potential impacts of IT by lowering the cost and expanding the reach of electronic networks far beyond those of earlier pro- prietary systems. Because of the explosive growth in Internet-based electronic commerce since the mid-1990s, along with continued growth in IT investment, it is important to look closely at the impacts of such technologies on the value chains of individual firms and the production networks of entire industries. Major changes in firm and industry structure have occurred in the PC industry since the mid-1990s, driven by technological change, competitive pres- sures, and strategic responses to those forces. PC vendors have adopted demand- driven, build-to-order production techniques and have outsourced functions in the value chain to outside partners in order to reduce costs and to respond more quickly to changes in a volatile market. PC makers increasingly focus internal efforts on core activities such as marketing, sales, and product management. They coordinate other activities such as product development, manufacturing, distribution, and customer service with external partners who include contract T This research has been supported by grants from the Alfred P. Sloan Foundation, and the U.S. National Science Foundation (CISE/IIS/DST). The authors would like to thank Thomas Malone, Rolf Wigand, Tim Sturgeon, and two anonymous referees for valuable comments and suggestions. CALIFORNIA MANAGEMENT REVIEW VOL. 47, NO. 3 SPRING 2005