Hüseyin Tanriverdi

Information technology relatedness, knowledge management capability, and performance of multibusiness firms

Business value of information technology is an enduring research question. The elusive link between IT and financial firm performance calls for further research into intermediate organizational variables through which IT may influence firm performance. This study proposes that knowledge management (KM) is a critical organizational capability through which IT influences firm performance. In the context of multibusiness firms, the study examines how the IT resources of a firm should be organized and managed to enhance the firms KM capability, and whether and how KM capability influences firm performance. The study develops two hypothesizes: (1) IT relatedness of the firms business units enhances cross-unit KM capability; (2) KM capability, in turn, leads to superior firm performance. Data from 250 Fortune 1000 firms provide empirical support for these hypotheses. IT relatedness of business units enhances the cross-unit KM capability of the firm. The KM capability creates and exploits cross-unit synergies from the product, customer, and managerial knowledge resources of the firm. These synergies increase the financial performance of the firm. IT relatedness also has significant indirect effects on firm performance through the mediation of KM capability.

Performance effects of information technology synergies in multibusiness firms

Unlike technologies that are applicable in a few specific industries, information technologies have a wide range of applicability across almost all industries. The fundamental principles of good IT management are also applicable in many industries. Thus, firms whose business units operate in different industries have an opportunity to exploit cross-unit IT synergies by applying their IT resources and management processes across multiple units. This study examines sources of cross-unit IT synergy and the conditions under which cross-unit IT synergies improve the performance of multibusiness firms. Building on the resource-based view of diversification and the economic theory of complementarities, the study identifies the relatedness and complementarity of IT resources as two major sources of cross-unit IT synergy. It argues that IT relatedness-the use of common IT infrastructure technologies and common IT management processes across business units-creates sub-additive cost synergies, whereas complementarities among IT infrastructure technologies and IT management processes create super-additive value synergies. In a sample of 356 multibusiness Fortune 1000 firms, the study finds that sub-additive cost synergies arising from the use of related IT resources or management processes do not have any effects on corporate performance, whereas the super-additive value synergies arising from the use of a complementary set of IT resources and management processes have significant effects on corporate performance. The diversification level of the firm moderates the relationship between IT synergies and corporate performance. As the diversification level increases, the performance effects of IT synergies remain positive, but they become weaker. The IT governance mode of the firm (centralized, decentralized, hybrid) does not make a difference in the performance effects of IT synergies.

The Choice of Sourcing Mechanisms for Business Processes

There is unprecedented interest in digitally enabled extended enterprises that enable firms to gain access to specialized skills and capabilities globally. Given this motivation, firms are unbundling their value chain processes and exploring new sourcing mechanisms. With the emergence of world-class skills and capabilities in offshore locations, new sourcing mechanisms have become available beyond traditional domestic insourcing and outsourcing. However, there is little systematic research examining how firms choose sourcing mechanisms for their business processes. This study views the digitally enabled extended enterprise as a complex system of business processes and examines how sourcing choices are made in such enterprises. It builds on the modular systems theory to posit that modularization of business processes and their underlying information technology (IT) support infrastructures are associated with the choice of sourcing mechanisms for the processes. The study tests this proposition in a sample of business process sourcing choices made by 93 medium and large U.S. firms. The results show that firms tend to choose domestic outsourcing for processes that are high in modularity and offshore outsourcing for processes that are low in modularity. Further, when processes can be detached from a firms IT infrastructure, firms tend to use offshore outsourcing. However, when processes are tightly coupled with underlying IT infrastructure, it may be infeasible to detach processes and execute them in remote locations. Implications for theory and practice are also discussed.

Diffusion of Telemedicine: A Knowledge Barrier Perspective

Telemedicine, broadly defined as the use of information technology (IT) to deliver medical services over distances, is one proposed solution to problems of accessibility, quality, and costs of medical care. Although telemedicine applications have proliferated in recent years, their diffusion has remained low in terms of the volume of consultations. In this study, we extend Attewells theory of knowledge barriers to explain why diffusion of telemedicine remains low. A longitudinal, embedded multiple case study of telemedicine programs in three medical centers in Boston, Massachusetts, reveals that, in addition to technical knowledge barriers, as suggested by Attewell, there are economic, organizational, and behavioral knowledge barriers that inhibit the diffusion of telemedicine. The lowering of these barriers entails intensive learning efforts by champions of applications within adopter organizations. They need to develop technically feasible, medically valid, reimbursable, and institutionally supported applications in order to justify the value of telemedicine and engender consistent and frequent use by physicians.

Research Commentary---Reframing the Dominant Quests of Information Systems Strategy Research for Complex Adaptive Business Systems

We review and reframe three main quests of research on information systems (IS) strategy: (1) the strategic alignment quest, (2) the integration quest, and (3) the sustained competitive advantage quest. The assumptions and logic of these quests have become less relevant in increasingly complex adaptive business systems (CABS), where the competitive performance landscapes of products and services are highly dynamic and co-evolve. We revise the strategic alignment quest to propose a co-evolution quest that addresses not only competitive strategy questions of a firm but also corporate strategy questions. The co-evolution quest seeks to increase a firms agility and dynamism in repositioning itself, identifying profitable product-market positions as the evolving competitive landscape erodes the profitability of the firms existing positions. To support the co-evolution quest, we revise the integration quest and propose a reconfiguration quest that encompasses not only business processes but also products and services, as well as the contracts, resources, and transactions associated with them. As the firm makes repositioning moves to co-evolve with the competitive landscape, the reconfiguration quest seeks to increase the firms agility in disintegrating its existing nexus of contracts, resources, and transactions that support the old positions and in reconfiguring new ones that support the new positions. Finally, we revise the sustained competitive advantage quest to propose a renewal quest that recognizes the temporary nature of competitive advantage in CABS. The renewal quest seeks to destabilize the firms old sources of competitive advantage when competitive dynamics erode their utility, rapidly create new sources of competitive advantage, and concatenate a series of temporary advantages over time. The three reframed quests provide the foundation for a research agenda on IS strategy in CABS.

Cross-Business Information Technology Integration and Acquirer Value Creation in Corporate Mergers and Acquisitions

This study develops and tests the idea that the cross-business information technology integration (CBITI) capability of an acquirer creates significant value for shareholders of the acquirer in mergers and acquisitions (M&A). In M&A, integrating the IT systems and IT management processes of acquirer and target could generate benefits such as (a) the consolidation of IT resources and the reduction of overall IT costs of the combined firm, (b) the development of an IT-based coordination mechanism and the realization of cross-firm business synergies, (c) the minimization of potential disruptions to business operations, and (d) greater ability to comply with relevant laws and regulations and the reduction of regulatory compliance costs. We test these ideas in a sample of 141 acquisitions conducted by 86 Fortune 1000 firms. In the short run, acquirers that have high levels of CBITI capabilities receive positive and significant cumulative abnormal returns to their M&A announcements. Announcement period returns indicate that the capital markets value CBITI similarly in same-industry and different-industry acquisitions. In the long run, acquirers with high levels of CBITI capabilities obtain significantly higher abnormal operating performance. They create significantly greater value in complementary acquisitions from different industries than in related acquisitions from the same industry. The findings have important implications for M&A research and practice.

REFLECTING “KNOWLEDGE” IN STRATEGY RESEARCH: CONCEPTUAL ISSUES AND METHODOLOGICAL CHALLENGES

Strategy researchers have become fascinated with the possibilities for developing theoretical perspectives rooted in knowledge and intellectual assets as drivers of superior performance. However, there have been many different schools of thought, each with its own conceptualization lenses and operationalization approaches. In this chapter, we focus on three schools of thought: (1) knowledge as stocks; (2) knowledge as flow; and (3) knowledge as a driver of an organizational capability. We use them to: (a) lay out the distinct approaches to conceptualization and operationalization of strategy-related concepts; and (b) identify specific ways to enhance theory-method correspondence. We believe that considerable progress could be made towards developing a knowledge-based view of strategy but only when accompanied by serious attention to measurement and methodological issues.

When it Capabilities are Not Scale-Free in Merger and Acquisition Integrations: How Do Capital Markets React to it Capability Asymmetries between Acquirer and Target?

In mergers and acquisitions (M&A), a primary objective of acquirer is to integrate IT resources of the target with its own. IT M&A integration is assumed to create synergies, which in turn increase shareholder wealth by making the value of the merged firm greater than the sum of the standalone values of the two firms. In this study, we challenge this assumption and argue that IT M&A integration does not always lead to greater value creation. Prior research on IT M&A integrations indicates that IT resources are often not scale-free in M&A: that is, they do not transfer easily and costlessly from an acquirer to its target or vice versa. In fact, IT M&A integration can destroy value rather than create it when IT resources are not scale-free. We theorize about the contingencies under which IT M&A integration can create value for shareholders of acquirers. We test our hypotheses in a sample of 549 M&A transactions between 1998 and 2007. We find that, on average, capital markets react negatively with M&A announcements of acquirers whose IT capabilities are superior relative to those of the targets. The superiority of the acquirer’s IT capabilities signals that the acquirer is likely to rip and replace IT resources of the target. This IT M&A integration approach increases risks of disruption to target’s operations and revenue growth. Capital markets take such risks into account and reduce the stock price of the acquirer. One contingency that reduces the negative reactions of capital markets is industry relatedness of target. In a same-industry acquisition, an acquirer and its target have similar operating models, competitive dynamics, and regulatory context. Thus, ripping and replacing weaker IT resources of the target with superior IT resources of the acquirer creates expectations of more efficient operation, engenders positive stock price reactions, and increases shareholder wealth. Another contingency that reduces the negative reactions of capital markets is the acquirer’s track record in profitable growth. A profitably growing acquirer that has superior IT capabilities increases the confidence of capital markets that it can minimize potential disruption risks of IT integration, continue its profitable growth pattern with newly acquired target, engender positive stock price reactions, and create shareholder wealth. These findings indicate that IT M&A integration does not always lead to greater value creation in M&A. The study makes a contribution by identifying the contingencies under which IT M&A integration creates wealth for acquirer’s shareholders.

Is it working? Working from home at Statoil, Norway

Statoil a.s., Den norske stats oljeselskap, made home PCs, private ISDN connections and Internet access freely available to virtually all of its about 18[punctuation space]000 employees worldwide in 1997. The goal of this unprecedented initiative was to improve information technology (IT) skills of Statoil employees in preparation for competition in the emerging knowledge economy. Statoil management taught that availability of PCs at home could create a natural learning environment for employees to acquire IT skills during their leisure time. Although the initiative has resulted in improvement of employee IT skills, as predicted, it has also brought about many emergent outcomes including a rapidly growing working from home practice at Statoil. This practice, in turn, has surfaced the need to rethink organizing principles and human resource policies at Statoil. In this paper, the authors describe evolution and outcomes of Statoils working from home initiative. Combining insights from Statoils initiative and the broader virtual work literature, they argue that working from home is an essential part of the knowledge strategy of firms. They propose a framework that conceptualizes working from home strategy in terms of administrative efficiency and knowledge effectiveness at individual and team or task unit levels. They summarize managerial and technical challenges brought about by each strategy.

EMC Corporation: Managing IT M&A Integrations to Enable Profitable Growth by Acquisitions

EMC Corporation is one of the fastest profitably growing public companies in the United States. It pursues both organic and acquisitive growth. Between 2005 and 2010, it acquired over 50 companies. EMC used to be a vendor entirely of enterprise storage products. Complementary products and technologies of the acquired companies enabled EMC to transform itself into a vendor offering complete systems of hardware and software solutions for addressing information infrastructure needs of customers. EMC’s acquisition strategy has been to retain the specialization and talent of acquired companies, and accelerate their revenue growth. Consistent with this strategy, EMC has followed a case-by-case approach in integrating IT infrastructures and applications of acquired companies. Depending on the strategic intent of an acquisition, EMC has left the IT of the acquired company alone; integrated it fully with that of EMC; or followed a hybrid IT integration approach. This case bycase IT M&A integration approach has been pivotal in EMC’s profitable growth through acquisitions. As of early 2011, EMC was facing an unprecedented profitable growth opportunity. However, as the company’s size and scope of products and operations grew, different levels of IT integration across various acquired businesses and product lines started to create some challenges. Business and IT leaders were contemplating how to address these challenges and how to architect the company to seize the profitable growth opportunities ahead. This case study examines how EMC has organized for and governed M&A integrations with a particular focus on IT M&A integrations.