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Do Market Leaders Lead in Business Process Innovation? The Case(s) of E-Business Adoption

April 2011

Written by: Kristina McElheran

Working Paper Number:

CES-11-10

Abstract

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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:
demand, market, manufacturing, sale, technology, technical, technological, invention, commerce, product, research, organizational, competitive, strategic, innovation, innovator, competitiveness, innovate, technology adoption, patenting, advantage, adoption

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:
Department of Commerce, National Science Foundation, Center for Economic Studies, Harvard University, Review of Economics and Statistics, Quarterly Journal of Economics, American Economic Review, Review of Economic Studies, MIT Press, Princeton University Press, Cambridge University Press, Electronic Data Interchange, Stanford University

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