Recent years have witnessed a surge of interest in the notion of capabilities as an important source of competitive advantage. This recognition has, in turn, placed emphasis on the question of where and how these capabilities emerge and how they influence firm performance. The present paper is an attempt to address this question. Using a large sample of detailed project-level data from a leading firm in the global software services industry, we attempt to empirically study the importance of capabilities. We find that two broad classes of capabilities are significant. The first class, which we label client-specific capabilities, is a function of repeated interactions with clients over time and across different projects. This learning from repeated interactions with a given client reduces project execution costs and helps improve project contribution. The second class, termed project management capabilities, is acquired through deliberate and persistent investments in infrastructure and systems to improve the firm's software development process. Our empirical results suggest that the marginal returns to acquiring different capabilities may be different and an understanding of such trade-offs can improve firm decisions to improve and/or acquire such capabilities. We discuss the key contributions of our paper and the implications for future research on capabilities.

Firms today use information about customers to improve service and design personalized offerings. To do this successfully, however, firms must collect consumer information. This study enhances awareness about a central paradox for firms investing in personalization; namely, that consumers who value information transparency are also less likely to participate in personalization. We examine the relationship between information technology features, specifically information transparency features, and consumer willingness to share information for online personalization. Based on a survey 1 V. Sambamurthy was the accepting senior editor for this paper. Prabhudev Konana was the associate editor. Sridhar Balasubramanian and Nirup Menon served as reviewers. of over 400 online consumers, we examine the question of whether customer perceived information transparency is associated with consumer willingness to be profiled online. Our results indicate that customers who desire greater information transparency are less willing to be profiled. This result poses a dilemma for firms, as the consumers that value information transparency features most are also the consumers who are less willing to be profiled online. In order to manage this dilemma, we suggest that firms adopt a strategy of providing features that address the needs of consumers who are more willing to partake in personalization, therefore accepting that the privacy sensitive minority of consumers are unwilling to participate in personalization, despite additional privacy features.

Do investments in customer satisfaction lead to excess returns? If so, are these returns associated with higher stock market risk? The empirical evidence presented in this article suggests that the answer to the first question is yes, but equally remarkable, the answer to the second question is no, suggesting that satisfied customers are economic assets with high returns/low risk. Although these results demonstrate stock market imperfections with respect to the time it takes for share prices to adjust, they are consistent with previous studies in marketing in that a firm's satisfied customers are likely to improve both the level and the stability of net cash flows. The implication, implausible as it may seem in other contexts, is high return/low risk. Specifically, the authors find that customer satisfaction, as measured by the American Customer Satisfaction Index (ACSI), is significantly related to market value of equity. Yet news about ACSI results does not move share prices. This apparent inconsistency is the catalyst for examining whether excess stock returns might be generated as a result. The authors present two stock portfolios: The first is a paper portfolio that is back tested, and the second is an actual case. At low systematic risk, both outperform the market by considerable margins. In other words, it is possible to beat the market consistently by investing in firms that do well on the ACSI.

This research evaluates the effect of customer relationship management (CRM) on customer knowledge and customer satisfaction. An analysis of archival data for a cross-section of U.S. firms shows that the use of CRM applications is positively associated with improved customer knowledge and improved customer satisfaction. This article also shows that gains in customer knowledge are enhanced when firms share their customer-related information with their supply chain partners.

Abstract-To produce high quality object-oriented (OO) applications, a strong emphasis on design aspects, especially during the early phases of software development, is necessary. Design metrics play an important role in helping developers understand design aspects of software and, hence, improve software quality and developer productivity. In this paper, we provide empirical evidence supporting the role of OO design complexity metrics, specifically a subset of the Chidamber and Kemerer suite, in determining software defects. Our results, based on industry data from software developed in two popular programming languages used in OO development, indicate that, even after controlling for the size of the software, these metrics are significantly associated with defects. In addition, we find that the effects of these metrics on defects vary across the samples from two programming languages-C++ and Java. We believe that these results have significant implications for designing high-quality software products using the OO approach.

Do investments in customer satisfaction lead to excess returns? If so, are these returns associated with higher stock market risk? The empirical evidence presented in this article suggests that the answer to the first question is yes, but equally remarkable, the answer to the second question is no, suggesting that satisfied customers are economic assets with high returns/low risk. Although these results demonstrate stock market imperfections with respect to the time it takes for share prices to adjust, they are consistent with previous studies in marketing in that a firm's satisfied customers are likely to improve both the level and the stability of net cash flows. The implication, implausible as it may seem in other contexts, is high return/low risk. Specifically, the authors find that customer satisfaction, as measured by the American Customer Satisfaction Index (ACSI), is significantly related to market value of equity. Yet news about ACSI results does not move share prices. This apparent inconsistency is the catalyst for examining whether excess stock returns might be generated as a result. The authors present two stock portfolios: The first is a paper portfolio that is back tested, and the second is an actual case. At low systematic risk, both outperform the market by considerable margins. In other words, it is possible to beat the market consistently by investing in firms that do well on the ACSI.

The information technology (IT) industry is characterized by rapid innovation and intense competition. To survive, IT firms must develop high quality software products on time and at low cost. A key issue is whether high levels of quality can be achieved without adversely impacting cycle time and effort. Conventional beliefs hold that processes to improve software quality can be implemented only at the expense of longer cycle times and greater development effort. However, an alternate view is that quality improvement, faster cycle time, and effort reduction can be simultaneously attained by reducing defects and rework. In this study, we empirically investigate the relationship between process maturity, quality, cycle time, and effort for the development of 30 software products by a major IT firm. We find that higher levels of process maturity as assessed by the Software Engineering Institute's Capability Maturity Model\trademark are associated with higher product quality, but also with increases in development effort. However, our findings indicate that the reductions in cycle time and effort due to improved quality outweigh the increases from achieving higher levels of process maturity. Thus, the net effect of process maturity is reduced cycle time and development effort.software process improvement, software economics, software productivity, software quality, software costs, software cycle time, capability maturity model

We study the determinants of contract choice in offshore software development projects and examine how the choice of contract and other factors in the project affect project profits accruing to the software vendor. Using data collected on 93 offshore projects from a leading Indian software vendor, we provide evidence that specific vendor-, client-, and project-related characteristics such as requirement uncertainty, project team size, and resource shortage significantly explain contract choice in these projects. Our analysis suggests that contract choice significantly determines project profit. Additionally, some ex ante vendor-, client-, and project-related characteristics known at the time of choosing the contract continue to significantly influence project profits after controlling for contract choice. We also provide evidence to show that project duration and team size affect project profits.Software Development;, Offshore Contracting;, Contract Choice;, Software Outsourcing