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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IT for Information-Based Partnerships: Empirical Analysis of Environmental Contingencies to Value Co-Creation
December 2009
Working Paper Number:
CES-09-42
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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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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An Examination of the Informational Value of Self-Reported Innovation Questions
October 2022
Working Paper Number:
CES-22-46
Self-reported innovation measures provide an alternative means for examining the economic performance of firms or regions. While European researchers have been exploiting the data from the Community Innovation Survey for over two decades, uptake of US innovation data has been much slower. This paper uses a restricted innovation survey designed to differentiate incremental innovators from more far-ranging innovators and compares it to responses in the Annual Survey of Entrepreneurs (ASE) and the Business R&D and Innovation Survey (BRDIS) to examine the informational value of these positive innovation measures. The analysis begins by examining the association between the incremental innovation measure in the Rural Establishment Innovation Survey (REIS) and a measure of the inter-industry buying and selling complexity. A parallel analysis using BRDIS and ASE reveals such an association may vary among surveys, providing additional insight on the informational value of various innovation profiles available in self-reported innovation surveys.
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The Diffusion of Modern Manufacturing Practices: Evidence from Retail-Apparel Sectors
February 1997
Working Paper Number:
CES-97-11
As in many industries, firms in the apparel industry exhibit substantial heterogeneity in the adoption of "modern manufacturing" practices. Based on detailed business-unit level data, we show that this heterogeneity can be explained firm inputs. We show that the interaction between these explanatory factors means that complementarities between inputs may emerge over time rather than all at once as is often assumed in other studies of complementarities.
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Investigating the Effect of Innovation Activities of Firms on Innovation Performance: Does Firm Size Matter?
January 2025
Working Paper Number:
CES-25-04
Understanding the relationship between a firm's innovation activities and its performance has been of great interest to management scholars. While the literature on innovation activities is vast, there is a dearth of studies investigating the effect of key innovation activities of the firm on innovation outcomes in a single study, and whether their effects are dependent on the nature of firms, specifically firm size. Drawing from a longitudinal dataset from the Business Research & Development and Innovation Survey (BRDIS), and informed by contingency theory and resource orchestration theory, we examine the relationship between a firm's innovation activities - including its Research & Development (R&D) investment, securing patents, collaborative R&D, R&D toward new business areas, and grants for R&D - and its product innovation and process innovation. We also investigate whether these relationships are contingent on firm size. Consistent with contingency theory, we find a significant difference between large firms and small firms regarding how they enhance product innovation and process innovation. Large firms can improve product innovation by securing patents through applications and issuances, coupled with active participation in collaborative R&D efforts. Conversely, smaller firms concentrate their efforts on the number of patents applied for, directing R&D efforts toward new business areas, and often leveraging grants for R&D efforts. To achieve process innovation, a similar dichotomy emerges. Larger firms demonstrate a commitment to securing patents, engage in R&D efforts tailored to new business areas, and actively collaborate with external entities on R&D efforts. In contrast, smaller firms primarily focus on securing patents and channel their R&D efforts toward new business pursuits. This nuanced exploration highlights the varied strategies employed by large and small firms in navigating the intricate landscape of both product and process innovation. The results shed light on specific innovation activities as antecedents of innovation outcomes and demonstrate how the effectiveness of such assets is contingent upon firm size.
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Delegation in Multi-Establishment Firms: The Organizational Structure of I.T. Purchasing Authority
October 2010
Working Paper Number:
CES-10-35
A rare large-scale empirical study of delegation within firms, this paper investigates how decision rights over information technology investments are allocated within multi-establishment firms. The core results indicate that a relatively high contribution to firm sales is highly correlated with authority being delegated to the local establishment. Firm-wide operational complexity and local information advantages are also associated with local discretion for IT purchases. Certain IT investments are also positively correlated with delegation. On the other hand, significant operational interdependencies evince a positive correlation with centralization, as do productive similarities among establishments. Surprisingly, absolute size of the firm and having a large IT budget are also correlated with centralized IT decision-making. With the exception of these latter effects, the results are consistent with models of organizational design that predict delegation where there is great demand for locally adapted choices and centralization where firm-wide coordination is most important. The findings document and make sense of widespread heterogeneity in decision rights across a range of firm and industry settings ' even among establishments belonging to the same parent firm. Finally, they suggest important considerations for future empirical and theoretical research into the determinants of delegation.
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An Option-Value Approach to Technology in U.S. Maufacturing: Evidence from Plant-Level Data
July 2000
Working Paper Number:
CES-00-12
Numerous empirical studies have examined the role of firm and industry heterogeneity in the decision to adopt new technologies using a Net Present Value framework. However, as suggested by the recently developed option-value theory, these studies may have overlooked the role of investment reversibility and uncertainty as important determinants of technology adoption. Using the option-value investment model as my underlying theoretical framework, I examine how these two factors affect the decision to adopt three advanced manufacturing technologies. My results support the option-value model's prediction that plants operating in industries facing higher investment reversibility and lower degrees of demand and technological uncertainty are more likely to adopt advanced manufacturing technologies.
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Technology Usage in U.S. Manufacturing Industries: New Evidence from the Survey of Manufacturing Technology
October 1991
Working Paper Number:
CES-91-07
Using a new dataset on technology usage in U.S. manufacturing plants, this paper describes how technology usage varies by plant and firm characteristics. The paper extends the previous literature in three important ways. First, it examines a wide range of relatively new technologies. Second, the paper uses a much larger and more representative set of firms and establishments than previous studies. Finally, the paper explores the role of firm R&D expenditures in the process of technology adoption. The main findings indicate that larger plants more readily use new technologies, plants owned by firms with high R&D-to-sales ratios adopt technologies more rapidly, and the relationship between plant age and technology usage is relatively weak.
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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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Diversification, Organizational Adjustment and Firm Performance: Evidence from Microdata
October 2007
Working Paper Number:
CES-07-29
This paper proposes that diversification taxes firms' existing organizational systems by altering routines, formal contract structures and strategies. I test the proposition that organizational adjustment costs associated with diversification erode incumbent competitive advantage, using novel microdata on taxicab firms from the Economic Census. The tests exploit exogenous local characteristics of taxi markets to identify the impact of diversification on firm organization and performance. Supporting the contention that diversification leads to organizational adjustments, the results show that diversifying firms are less likely to adopt computerized dispatching systems for their taxicabs and make significant changes in their formal contract structures governing asset ownership. Consistent with the theory, diversification is associated with falling taxi productivity. Comparing the productivity of diversified and focused start-ups and incumbent firms reveals that the organizational change component of diversification accounts for an 18% decrease in paid ride-miles per taxi. The results support the core contention of the paper that diversification taxes firms' existing organizational capital.
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