Editorial Introduction
The paper empirically examines the effects of social capital of the relationship between the chief information officer (CIO) and top management team (TMT) on organizational value creation based on responses from CIOs and matched TMT respondents from 81 hospitals in the United States. Specifically, we theorize how the three dimensions of social capital—structural, cognitive, and relational social capital—facilitate knowledge exchange and combination between the CIO and TMT resulting in the alignment between the organization's information systems (IS) strategy and business strategy. Results show that IS alignment significantly influences the firm's financial performance and mediates the relationship between CIO-TMT social capital and performance. The findings also indicate that cognitive and relational social capital influence information systems strategic alignment but that structural social capital exerts its influence through its effects on cognitive social capital. Recommendations are provided as to how organizations can develop CIO-TMT structural, cognitive, and relational social capital to positively influence firm performance via IS strategic alignment.
This study investigates the development and sustainability of a firm's information technology (IT) capability reputation from an IT executive's standpoint. Building on institutional theory, we argue that IT executives will try to achieve external legitimacy (i.e., project an image of superior IT capability to external stakeholders) in the hope that the top management team and board members will reciprocate by elevating the internal legitimacy of IT executives. Firms that develop such a culture of reciprocity with their IT executives are more likely to sustain their IT capability reputation. Econometric results based on panel data for 1,326 large U.S. firms from a wide spectrum of industries over a 13-year period (1997-2009) validate these predictions. More specifically, we find that IT executives with greater structural power (e.g., higher job titles) or IT-related expert power (e.g., IT-related education or experience) are more likely to attract public recognition for their firm's IT capability. Firms that build such an IT capability reputation are more likely to promote their IT executives, and IT executives who are promoted are more likely to stay longer with their firms. This continuity in IT strategic leadership is positively associated with the firm's ability to sustain its IT capability reputation. Our findings have important practical implications related to a firm's IT reputation strategy as well as the motivation and career of IT executives. Firms wanting to develop and sustain their IT capability reputation would do well to foster the creation of a cycle of positive reciprocity with their IT executives. IT executives hoping to increase their power within their firm's top management team and improve the legitimacy of the firm's IT organization need to project an image of IT superiority to external stakeholders.
Previous research has found that information technology (IT) investment is associated with significant productivity gains for developed countries but not for developing countries. Yet developing countries have continued to increase their investment in IT rapidly. Given this apparent disconnect, there is a need for new research to study whether the investment has begun to pay off in greater productivity for developing countries. We analyze new data on IT investment and productivity for 45 countries from 1994 to 2007, and compare the results with earlier research. We find that upper-income developing countries have achieved positive and significant productivity gains from IT investment in the more recent period as they have increased their IT capital stocks and gained experience with the use of IT. We also find that the productivity effects of IT are moderated by country factors, including human resources, openness to foreign investment, and the quality and cost of the telecommunications infrastructure. The academic implication is that the effect of IT on productivity is expanding from the richest countries into a large group of developing countries. The policy implication is that lower-tier developing countries can also expect productivity gains from IT investments, particularly through policies that support IT use, such as greater openness to foreign investment, increased investment in tertiary education, and reduced telecommunications costs.
The interdependency of information security risks often induces firms to invest inefficiently in information technology security management. Cyberinsurance has been proposed as a promising solution to help firms optimize security spending. However, cyberinsurance is ineffective in addressing the investment inefficiency caused by risk interdependency. In this paper, we examine two alternative risk management approaches: risk pooling arrangements (RPAs) and managed security services (MSSs). We show that firms can use an RPA as a complement to cyberinsurance to address the overinvestment issue caused by negative externalities of security investments; however, the adoption of an RPA is not incentive-compatible for firms when the security investments generate positive externalities. We then show that the MSS provider serving multiple firms can internalize the externalities of security investments and mitigate the security investment inefficiency. As a result of risk interdependency, collective outsourcing arises as an equilibrium only when the total number of firms is small.
Online whistle-blowing reporting systems (WBRS) have become increasingly prevalent channels for reporting organizational failures. The Sarbanes-Oxley Act and similar international laws now require firms to establish whistle-blowing (WB) procedures and WBRSs, increasing the importance of WB research and applications. Although the literature has addressed conventional WB behavior, it has not explained or measured the use of WBRSs in online contexts that could significantly alter elements of anonymity, trust, and risk for those using such reporting tools. This study proposes the WBRS model (WBRS-M). Using actual working professionals in an online experiment of hypothetical scenarios, we empirically tested the WBRS-M for reporting computer abuse and find that anonymity, trust, and risk are highly salient in the WBRS context. Our findings suggest that we have an improved WB model with increased explanatory power. Organizations can make WB less of a professional taboo by enhancing WBRS users' perceptions of trust and anonymity. We also demonstrate that anonymity means more than the mere lack of identification, which is not as important in this context as other elements of anonymity.
Information systems development (ISD) projects are prone to high levels of failure. One of the major reasons attributed to these failures is the inability to harmonize values held by a diverse set of participants in an environment that is characterized by uncertainty due to changing requirements. In this paper, we focus on a relational approach to achieve congruence between a project manager and a team member with respect to influence tactics. Constructs of perceptual congruence and communication congruence that reflect a level of agreement and degree of shared understanding between the project manager and team members are described. A congruence model is constructed and tied to an intermediate outcome variable of control loss. One hundred and thirteen dyadic pairs of project managers and team members are surveyed in order to test the model. The results indicate that having strong relational equity and common understanding can minimize control loss. It is important to consider the perspectives of both the project manager and a team member while formulating and assessing monitoring strategies to promote the success of an ISD project. Especially, encouraging team members to discuss disagreements constructively can motivate them to perform better and keep things under control. Finally, it is critical to address the performance problems as they occur rather than wait until the completion of the project.
Despite advances in software development practices, organizations struggle to implement methodologies that match the risk in a project environment with needed coordination capabilities. Plan-driven and agile software development methodologies each have strengths and risks. However, most project environments cannot be classified as entirely "risky" or "stable," suggesting the need for hybrid approaches. We leverage a design science approach to implement a novel hybrid methodology based on concepts from the service-oriented paradigm. We motivate the approach using theory on interdependence and coordination, and design the methodology using theory on modularity and service-dominant logic. We also examine the effects of its adoption at a large electrical power company over a three-year period. The results imply that service-oriented theory should be applied to the human processes involved in systems development in order to achieve better fit between project risk, interdependencies, and the selected methodology(ies) in order to improve overall project performance.
Does a firm get any extra value from investing resources in sponsoring its own virtual community above and beyond the value that could be created for the firm, indirectly, via customer-initiated communities? If so, what explains the extra value derived from a firm-sponsored virtual community and how might this understanding inform managers about appropriate strategies for leveraging virtual communities as part of a value-creating strategy for the firm? We test two models of virtual community to help shed light on the answers to these questions. We hypothesize that in customer-initiated virtual communities, three attributes of member-generated information (MGI) drive value, while in firm-sponsored virtual communities, a sponsoring firm's efforts, as well as MGI, drive value. Drawing on information search and processing theories, and developing new measures of three attributes of MGI (consensus, consistency, and distinctiveness), we surveyed 465 consumers across numerous communities. We find that value can emerge via both models, but that in a firm-sponsored model, a sponsor's efforts are more powerful than MGI and have a positive, direct effect on the trust-building process. Our results suggest a continuum of value creation whereby firms extract greater value as they migrate toward the firm-sponsored model.
Online reviews play a significant role in forming and shaping perceptions about a product. With the credibility of online reviewers a frequent question, this research investigates how potential buyers assess the credibility of anonymous reviewers. Technology separates the reviewer from the review, and potential buyers are left to rely on characteristics of the review itself to determine the credibility of the reviewer. By extending the language expectancy theory to the online setting, we develop hypotheses about how expectancy violations of lexical complexity, two-sidedness (highlighting positive and negative aspects of a product), and affect intensity influence credibility attributions. We present an experiment in which favorable experimental reviews were generated based on actual reviews for a digital camera. The results indicate that two-sidedness caused a positive expectancy violation resulting in greater credibility attribution. High affect intensity caused a negative expectancy violation resulting in lower credibility attribution. Finally, high reviewer credibility significantly improved perceptions of product quality. Our results demonstrate the importance of expectancies and violations when attributing credibility to anonymous individuals. Even small expectancy violations can meaningfully influence reviewer credibility and perceptions of products.
Firms face significant risk when they adopt digital supply chain systems to transact and coordinate with their partners. Drawn upon modular systems theory, this study proposes that system modularity mitigates the risk of adopting digital supply chain systems and therefore motivates firms to digitize more of their supply chain operations. The study theorizes how the risk-mitigating effect of system modularity can be enhanced by the allocation of decision rights to the IT (information technology) unit. The main logic is that IT managers with more domain IT knowledge can better utilize their knowledge in decision making to achieve effective system modularity. We tested these theoretical propositions using a survey study of Chinese companies and found empirical support. We also found that the allocation of decision rights to the IT unit does not directly mitigate the perceived risk of digital supply chain systems, which highlights the role of decision allocation to the IT unit as a key moderator in risk mitigation. The study generates theoretical and practical implications on how IT governance and system modularity may jointly mitigate risk and foster supply chain digitization.
Special Issue: Information Economics and Competitive Strategy
As information technology (IT) becomes more accessible, sustaining any competitive advantage from it becomes challenging. This has caused some critics to dismiss IT as a less valuable resource. We argue that, in addition to being able to generate strategic advantage, IT should also be viewed as a strategic necessity that prevents competitive disadvantage in rapidly changing business environments. We test a set of hypotheses on strategic advantage and strategic necessity in the context of Internet banking investments for the population of U.S. Federal Deposit Insurance Corporation (FDIC) banks from 2003 to 2005. We seek to understand whether their IT investments were made as a strategic choice or as a result of strategic necessity. Our econometric analysis suggests that IT investments (1) were made to complement firm strategy for strategic advantage as well as due to strategic necessity, and (2) paid off by enhancing firm performance and addressing the issue of strategic necessity. In addition, our analysis reveals the simultaneous relationship between performance and IT investments: high-performing banking firms appear to have been more likely to invest in IT. The econometric analysis methods that we employ made it possible for us to state all of our quantitative findings for the FDIC data to be stated after adjusting for this endogeneity through simultaneity.
This study identifies how security performance and compliance influence each other and how security resources contribute to two security outcomes: data protection and regulatory compliance. Using simultaneous equation models and data from 243 hospitals, we find that the effects of security resources vary for data breaches and perceived compliance and that security operational maturity plays an important role in the outcomes. In operationally mature organizations, breach occurrences hurt compliance, but, surprisingly, compliance does not affect actual security. In operationally immature organizations, breach occurrences do not affect compliance, whereas compliance significantly improves actual security. The results imply that operationally mature organizations are more likely to be motivated by actual security than compliance, whereas operationally immature organizations are more likely to be motivated by compliance than actual security. Our findings provide policy insights on effective security programs in complex health-care environments.
How does the adoption of cloud computing by a firm affect the organizational structure of its information technology (IT) department? To analyze this question, we consider an IT department that procures IT services from a cloud computing vendor and enhances these services for consuming units within the firm. Our model incorporates the competitive environment faced by the cloud vendor, which affects the price of the cloud vendor. We find that when the cloud vendor faces intense competition, the cost-center organizational model is preferred over the profit-center model. Infrastructure services such as basic storage, e-mail, and raw computing face intense competition, and our results suggest that such services be offered as a free corporate resource under the cost-center organizational structure. When the cloud vendor has pricing power, a profit-center organizational structure is likely to be preferred. Our results suggest that highly differentiated services such as cloud-based enterprise-wide enterprise resource planning or business intelligence be offered under the profit-center structure. Finally, the profit-center structure provides greater internal quality enhancement to cloud-based IT services than the cost center.
Drawing on the notion of channel capability, we develop a theoretical ramework for understanding the interactions between mobile and traditional online channels for products with different characteristics. Specifically, we identify two channel capabilities—access and search capabilities—that differentiate mobile and online channels, and two product characteristics that are directly related to the channel capabilities—time criticality and information intensity. Based on this framework, we generate a set of predictions on the differential effects of mobile channel introduction across different product categories. We test the predictions by applying a counterfactual analysis based on vector autoregression to a large panel data set from a leading e-market in Korea that covers a 28-month period and contains all of the transactions made through the online and mobile channels before and after the mobile channel introduction. Consistent with our theoretical predictions, our results suggest that the performance impact of the mobile channel depends on the two product characteristics and the resulting product-channel fit. We discuss implications for theory and multichannel strategy.
The use of telemedicine to improve patients' health has been evolving rapidly over the past few years. Initially, our clinical research focus was on the development of effective ways for treating chronically ill patients, mostly those suffering from neurological disorders. While we identified the medical benefits of this information technology, there remains a salient strategic question addressing its competitive impact. In this paper, we analyze the impact of introducing telemedicine on the market share of the specialty hospital deploying this technology and on the competing hospitals in the region. Our analytical results prove that, contrary to earlier expectations, the value of telemedicine relative to in-person visits is not always increasing with the distance of the patient from the hospital. This result explains why patients located far from the specialty hospital may not prefer telemedicine care. We prove that telemedicine, unlike numerous other e-commerce applications, does not lead to the "winner takes all" phenomenon. We found that the advent of telemedicine changes the competitive equilibrium between specialty hospitals and community hospitals. Both hospital types will significantly benefit from delivering complementary care to chronic patients, rather than continuing to compete with each other.
We consider an online market where consumers may obtain digital goods from two mutually exclusive channels: a legitimate channel consisting of many law-abiding retailers and a piracy channel consisting of many piracy services. We analyze consumer choice, retailer strategy, and piracy control using a sequential-search approach where information acquisition is costly for some consumers (nonshoppers), yet costless for others (shoppers). First, we show that a nonshopper's channel choice is determined by a simple comparison of two reservation prices. Second, we analyze how piracy threats affect in-channel pricing among retailers. If the in-channel competition intensity among retailers is high, piracy does not affect retailer pricing. If the intensity is medium, retailers respond to piracy by giving up some shoppers and, surprisingly, raising prices. If the intensity is low, the legitimate channel loses some shoppers as well as some nonshoppers to the piracy channel. Third, we consider several mechanisms for fighting piracy and analyze their effects on firm profit and consumer surplus. Reducing piracy quality and increasing piracy search costs are both effective in controlling piracy, yet they affect consumer surplus differently. Reducing the number of piracy services is less effective in controlling piracy.
In recent years, there has been stellar growth of location-based/enabled social networks in which people can "check in" to physical venues they are visiting and share with friends. In this paper, we hypothesize that the "check-ins" made by friends help users learn the potential payoff of visiting a venue. We argue that this learning-in-a-network process differs from the classic observational learning model in a subtle yet important way: Rather than from anonymous others, the agents learn from their network friends, about whose tastes in experience goods the agents are better informed. The empirical analyses are conducted on a unique data set in which we observe both the explicit interpersonal relationships and their ensuing check-ins. The key result is that the proportion of checked-in friends is not positively associated with the likelihood of a new visit, rejecting the prediction of the conventional observational learning model. Drawing on the literature in sociology and computer science, we show that weighting the friends' check-ins by a parsimonious proximity measure can yield a more intuitive result than the plain proportion does. Repeated check-ins by friends are found to have a pronounced effect. Our empirical result calls for the revisiting of observational learning in a social network setting. It also suggests that practitioners should incorporate network proximity when designing social recommendation products and conducting promotional campaigns in a social network.
Consumer buzz in the form of user-generated reviews, recommendations, and blogs signals that consumer attitude and advocacy can influence firm value. Web traffic also affects brand awareness and customer acquisition, and is a predictor of the performance of a firm's stock in the market. The information systems and accounting literature have treated buzz and traffic separately in studying their relationships with firm performance. We consider the interactions between buzz and traffic as well as competitive effects that have been overlooked heretofore. To study the relationship between user-initiated Web activities and firm performance, we collected a unique data set with metrics for consumer buzz, Web traffic, and firm value. We employed a vector autoregression with exogenous variables model that captures the evolution and interdependence between the time series of dependent variables. This model enables us to examine a series of questions that have been raised but not fully explored to date, such as dynamic effects, interaction effects, and market competition effects. Our results support the dynamic relationships of buzz and traffic with firm value as well as the related mediation effects of buzz and traffic. They also reveal significant market competition effects, including effects of both a firm's own and its rivals' buzz and traffic. The findings also provide insights for e-commerce managers regarding Web site design, customer relation management, and how to best respond to competitors' strategic moves.
