We empirically examine IT value co-creation in supply chains, incorporating key contingencies of the competitive environment. Prior research suggests that IT used for strategic informationbased partnerships may benefit supply chains facing higher volatility, enabling tightly coupled integration and enhanced strategic response to changing consumer preferences. Analyzing a unique dataset comprising over 6,000 U.S. manufacturing plants, we obtain three principal results. First, value co-creation using either IT for strategic information-based partnerships (ITIP) or merely IT for transaction efficiency (ITT) is positive and significant. Second, the co-created value from ITIP is larger than that for (ITT), suggesting that information-based partnerships, while perhaps requiring a greater investment, yield a higher return. Third and most importantly, co-created value from using IT for information-based partnerships is positively moderated by demand volatility, i.e., value is greater in higher demand volatility environments. However, we find the opposite is true for using IT for efficient transactions. This is a new contribution to the literature and has important theoretical and practical implications.
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How Businesses Use Information Technology: Insights for Measuring Technology and Productivity
June 2006
Working Paper Number:
CES-06-15
Business use of computers in the United States dates back fifty years. Simply investing in information technology is unlikely to offer a competitive advantage today. Differences in how businesses use that technology should drive differences in economic performance. Our previous research found that one business use ' computers linked into networks ' is associated with significantly higher labor productivity. In this paper, we extend our analysis with new information about the ways that businesses use their networks. Those data show that businesses conduct a variety of general processes over computer networks, such as order taking, inventory monitoring, and logistics tracking, with considerable heterogeneity among businesses. We find corresponding empirical diversity in the relationship between these on-line processes and productivity, supporting the heterogeneity hypothesis. On-line supply chain activities such as order tracking and logistics have positive and statistically significant productivity impacts, but not processes associated with production, sales, or human resources. The productivity impacts differ by plant age, with higher impacts in new plants. This new information about the ways businesses use information technology yields vital raw material for understanding how using information technology improves economic performance.
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Data in Action: Data-Driven Decision Making in U.S. Manufacturing
January 2016
Working Paper Number:
CES-16-06
Manufacturing in America has become significantly more data-intensive. We investigate the adoption, performance effects and organizational complementarities of data-driven decision making (DDD) in the U.S. Using data collected by the Census Bureau for 2005 and 2010, we observe the extent to which manufacturing firms track and use data to guide decision making, as well as their investments in information technology (IT) and the use of other structured management practices. Examining a representative sample of over 18,000 plans, we find that adoption of DDD is earlier and more prevalent among larger, older plants belonging to multi-unit firms. Smaller single-establishment firms adopt later but have a higher correlation with performance than similar non-adopters. Using a fixed-effects estimator, we find the average value-added for later DDD adopters to be 3% greater than non-adopters, controlling for other inputs to production. This effect is distinct from that associated with IT and other structured management practices and is concentrated among single-unit firms. Performance improves after plants adopt DDD, but not before ' consistent with a causal relationship. However, DDD-related performance differentials decrease over time for early and late adopters, consistent with firm learning and development of organizational complementarities. Formal complementarity tests suggest that DDD and high levels of IT capital reinforce each other, as do DDD and skilled workers. For some industries, the benefits of DDD adoption appear to be greater for plants that delegate some decision making to frontline workers.
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Computer Network Use and Firms' Productivity Performance: The United States vs. Japan
September 2008
Working Paper Number:
CES-08-30
This paper examines the relationship between computer network use and firms' productivity performance, using micro-data of the United States and Japan. To our knowledge, this is the first comparative analysis using firm-level data for the manufacturing sector of both countries. We find that the links between IT and productivity differ between U.S. and Japanese manufacturing. Computer networks have positive and significant links with labor productivity in both countries. However, that link is roughly twice as large in the U.S. as in Japan. Differences in how businesses use computers have clear links with productivity for U.S. manufacturing, but not in Japan. For the United States, the coefficients of the intensity of network use are positive and increase with the number of processes. Coefficients of specific uses of those networks are positive and significant. None of these coefficients are significant for Japan. Our findings are robust to alternative econometric specifications. They also are robust to expanding our sample from single-unit manufacturing firms, which are comparable in the two data sets, to the entire manufacturing sector in each country, as well as to the wholesale and retail sector of Japan.
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The Impact of Information and Communication Technology Adoption on Multinational Firm Boundary Decisions
January 2016
Working Paper Number:
CES-16-01
This paper evaluates the effect of adopting internet-enabled information and communication technology (ICT) adoption on the decision to reorganize production across national borders (foreign boundary decision) by multinational enterprises (MNE). Using a transaction cost framework, we argue that ICT adoption influences foreign boundary decisions by lowering coordination costs both internally and externally for the firm. We propose that the heterogeneity in the technology's characteristics, namely complexity and the production processes' degree of codifiability, moderate this influence. Using a difference-in-differences methodology and exploiting the richness of confidential U.S. Census Bureau microdata, we find that overall ICT adoption is positively associated with greater likelihood of in-house production, as measured by increases in intra-firm trade shares. Furthermore, we find that more complex forms of ICT are associated with larger increases in intra-firm trade shares. Finally, our results indicate that MNEs in industries in which production specifications are more easily codified in an electronic format are less likely to engage in intra-firm relative to arms-length trade following ICT adoption.
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Computer Networks and U.S. Manufacturing Plant Productivity: New Evidence from the CNUS Data
January 2002
Working Paper Number:
CES-02-01
How do computers affect productivity? Many recent studies argue that using information technology, particularly computers, is a significant source of U.S. productivity growth. The specific mechanism remains elusive. Detailed data on the use of computers and computer networks have been scarce. Plant-level data on the use of computer networks and electronic business processes in the manufacturing sector of the United States were collected for the first time in 1999. Using these data, we find strong links between labor productivity and the presence of computer networks. We find that average labor productivity is higher in plants with networks. Computer networks have a positive and significant effect on plant labor productivity after controlling for multiple factors of production and plant characteristics. Networks increase estimated labor productivity by roughly 5 percent, depending on model specification. Model specifications that account for endogenous computer networks also show a positive and significant relationship. Our work differs from others in several important aspects. First, ours is the first study that directly links the use of computer networks to labor productivity using plant-level data for the entire U.S. manufacturing sector. Second, we extend the existing model relating computers to productivity by including materials as an explicit factor input. Third, we test for possible endogeneity problems associated with the computer network variable.
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Predictive Analytics and Organizational Architecture:
Plant-Level Evidence from Census Data
January 2019
Working Paper Number:
CES-19-02
We examine trends in the use of predictive analytics for a sample of more than 25,000 manufacturing plants using proprietary data from the US Census Bureau. Comparing 2010 and 2015, we find that use of predictive analytics has increased markedly, with the greatest use in younger plants, professionally-managed firms, more educated workforces, and stable industries. Decisions on data to be gathered originate from headquarters and are associated with less delegation of decision-making and more widespread awareness of quantitative targets among plant employees. Performance targets become more accurate, long-term oriented, and linked to company-wide performance, and management incentives strengthen, both in terms of monetary bonuses and career outcomes. Plants increasing predictive analytics become more efficient, with lower inventory, increased volume of shipments, narrower product mix, reduced management payroll and increased use of flexible and temporary employees. Results are robust to a specification based on increased government demand for data.
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Electronic Networking Technologies, Innovation Misfit, and Plant Performance
February 2010
Working Paper Number:
CES-10-03
Prior work on information technology (IT) adoption and economic impacts typically employs an instrumental logic in which firms lead with innovation when they possess characteristics that make it economically beneficial to do so and lag when they do not. However, firms may deviate from this idealized picture when they possess characteristics of an innovation laggard but exhibit the behavior of an innovation leader (or vice versa), with implications for the returns to IT investment. This study develops a conceptual framework and hypotheses regarding the implications of such deviations, which we call innovation misfits. Using a data set comprising measures of the adoption of electronic networking technologies (ENT) in over 25,000 U.S. manufacturing plants, productivity regression estimation reveals a consistent pattern that the association between IT and productivity is diminished in the presence of innovation misfit. We discuss the implications of innovation misfit for scholarship and management practice, which are numerous.
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Do Market Leaders Lead in Business Process Innovation? The Case(s) of E-Business Adoption
April 2011
Working Paper Number:
CES-11-10
This paper investigates the relationship between market position and the adoption of IT-enabled process innovations. Prior research has focused overwhelmingly on product innovation and garnered mixed empirical support. I extend the literature into the understudied area of business process innovation, developing a framework for classifying innovations based on the complexity, interdependence, and customer impact of the underlying business process. I test the framework's predictions in the context of ebuying and e-selling adoption. Leveraging detailed U.S. Census data, I find robust evidence that market leaders were significantly more likely to adopt the incremental innovation of e-buying but commensurately less likely to adopt the more radical practice of e-selling. The findings highlight the strategic significance of adjustment costs and co-invention capabilities in technology adoption, particularly as businesses grow more dependent on new technologies for their operational and competitive performance.
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WHAT DO I TAKE WITH ME?: THE MEDIATING EFFECT OF SPIN-OUT TEAM SIZE AND TENURE ON THE FOUNDER-FIRM PERFORMANCE RELATIONSHIP
April 2013
Working Paper Number:
CES-13-17
Our study examines the mediating effect of spin-out team characteristics on the relationship between founder quality and parent and spin-out performance. Since the ability to transfer or recreate complementary assets is a critical determinant of performance, we theorize and show that founders with greater ability impact both parent firm and spin-out performance by assembling teams that represent strong complementary human capital. Using linked employee-employer US Census data from the legal services industry, we find founding team size and tenure mediate the founder quality effect. Our findings have practical implications for both managers of existing firms and aspiring founders as it relates to their human resource strategies: the factor most salient to performance is not the individual quality per se, but the manner in which it impacts the transfer and spillover of complementary human capital.
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The Management and Organizational Practices Survey (MOPS): An Overview*
January 2016
Working Paper Number:
CES-16-28
Understanding productivity and business dynamics requires measuring production outputs and inputs. Through its surveys and use of administrative data, the Census Bureau collects information on production outputs and inputs including labor, capital, energy, and materials. With the introduction of the Management and Organizational Practices Survey (MOPS), the Census Bureau added information on another component of production: management. It has long been hypothesized that management is an important component of firm success, but until recently the study of management was confined to hypotheses, anecdotes, and case studies. Building upon the work of Bloom and Van Reenen (2007), the first-ever large scale survey of management practices in the United States, the MOPS, was conducted by the Census Bureau for 2010. A second, enhanced version of the MOPS is being conducted for 2015. The enhancement includes two new topics related to management: data and decision making (DDD) and uncertainty. As information technology has expanded plants are increasingly able to utilize data in their decision making. Structured management practices have been found to be complementary to DDD in earlier studies. Uncertainty has policy implications because uncertainty is found to be associated with reduced investment and employment. Uncertainty also plays a role in the targeting component of management.
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