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T his study examines how capabilities of information systems (IS) applications deployed in the context of interfirm relationships contribute to business performance. We propose that these capabilities augment the relational value that a firm derives from its business partners-channel partners and customer enterprises-in the context of the distribution channel. Two cospecialized relational assets are considered as key to realization of relational value-knowledge sharing and process coupling. Hypotheses linking two IS capabilities (IS flexibility and IS integration) to the relational asset dimensions, and ultimately to firm performance, are proposed. The research model is tested based on data collected through a survey of business units of enterprises embedded in customer and channel partner ties in the high-tech and financial services industries. We find that IS integration with channel partners and customers contributes to both knowledge sharing and process coupling with both types of enterprise partners, whereas IS flexibility is a foundational capability that indirectly contributes to value creation in interfirm relationships by enabling greater IS integration with partner firms. We find that two types of relational assets are significantly associated with business performance-knowledge sharing with channel partners and process coupling with customers-pointing to underlying mechanisms that differentially leverage resources of different types of channel partners. Implications for theory development and practice based on these findings are proposed.

Extant literature offers two mostly distinct perspectives on enterprise systems assimilation -driven either by internal expertise and learning capability or by external institutional pressures. This study combines the two perspectives and subscribes to the view that organisations' learning capability moderates their acquiescence to institutional pressures. The study then anchors organisational learning capability to the concept of absorptive capacity and proposes that its two dimensions -potential absorptive capacity (PACAP) and realised absorptive capacity (RACAP) -affect enterprise systems assimilation through different pathways. Our survey-based empirical study of Enterprise Resource Planning (ERP) systems in the post-implementation stage reveals that while both PACAP and RACAP have a positive direct impact on assimilation, PACAP positively moderates the impact of mimetic (institutional) pressures, but not normative (institutional) pressures, on assimilation; whereas RACAP positively moderates the impact of normative pressures, but not mimetic pressures, on assimilation. Thus, our theoretical contribution lies in understanding the distinct ways in which PACAP and RACAP moderate the influence of external institutional pressures on enterprise systems assimilation.

Organizational ambidexterity refers to the capability of businesses to balance the pursuit of radical innovation simultaneously with incremental innovation. It echoes the popular notion that to thrive well in a competitive economy, businesses need to balance their exploration of new markets and products with exploitation or balance operational efficiency with flexibility. Digital technologies have become central to enabling organizational ambidexterity. The analysis reveals how the three dimensions of digitization efforts—IT implementation spending, IT training, and actual IT usage—should be combined with specific internal and external factors to develop greater ambidexterity. Two of these complementary factors are either a centralized organizational structure or a strong supplier and partner network—the first a likely channel for cross-organizational knowledge transfer and the second for interfirm knowledge transfers. However, determining which combinations are useful also depends on the size of the business and competitiveness of markets. Large businesses, or those in more competitive sectors, derive a slightly greater advantage from digitization than small firms or those in less competitive sectors. These findings are useful for policy makers tasked with subsidy allocation to industry sectors and managers when allocating investment spending for digitization.

E nterprise systems software (ESS) is a multibillion dollar industry that produces systems components to support a variety of business functions for a widerange of vertical industry segments. Even if it forms the core of an organization's information systems (IS) infrastructure, there is little prior IS research on the competitive dynamics in this industry. Whereas economic modeling has generally provided the methodological framework for studying standards-driven industries, our research employs social network methods to empirically examine ESS firm competition. Although component compatibility is critical to organizational end users, there is an absence of industry-wide ESS standards and compatibility is ensured through interfirm alliances. First, our research observes that this alliance network does not conform to the equilibrium structures predicted by economics of network evolution supporting the view that it is difficult to identify dominant standards and leaders in this industry. This state of flux combined with the multifirm multicomponent nature of the industry limits the direct applicability of extant analytical models. Instead, we propose that the relative structural position acquired by a firm in its alliance network is a reasonable proxy for its standards dominance and is an indicator of its performance. In lieu of structural measures developed mainly for interpersonal networks, we develop a measure of relative firm prominence specifically for the business software network where benefits of alliances may accrue through indirect connections even if attenuated. Panel data analyses of ESS firms that account for over 95% of the industry revenues, show that our measure provides a superior model fit to extant social network measures. Two interesting counterintuitive findings emerge from our research. First, unlike other software industries compatibility considerations can trump rivalry concerns. We employ quadratic assignment procedure to show that firms freely form alliances even with their rivals. Second, we find that smaller firms enjoy a greater value from acquiring a higher structural position as compared to larger firms.

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As more and more firms seek to digitize their business processes and develop new digital capabilities, the enterprise systems software (ESS) has emerged as a significant industry. ESS firms offer software components (e.g., ERP, CRM, Marketing analytics) to shape their clients' digitization strategies. With rapid rates of technological and market innovation, the ESS industry consists of several horizontal markets that form around these components. As numerous vendors compete with each other within and across these markets, many of these horizontal markets appear to be crowded with rivals. In fact, multimarket contact and presence in crowded markets appear to be the pathways through which a majority of the ESS firms compete. Though the strategy literature has demonstrated the virtues of multimarket contact, paradoxically, the same literature argues that operating in crowded markets is not wise. In particular, crowded markets increase a firm's exposure to the whirlwinds of intense competition and have deleterious consequences for financial performance. Thus, the behavior of ESS firms raises an interesting anomaly and research question: Why do ESS firms continue to compete in crowded markets if they are deemed to be bad for financial performance? We argue that the effects of rivalry in crowded markets are counteracted by a different force, in the form of the economics of demand externalities. Demand externalities occur because the customers of ESS firms expect that software components from one market will be easily integrated with those that they buy from other markets. However, with rapid rates of technological innovation and market formation and dissolution, customers experience significant ambiguity in deciding which markets and components suit their needs. Therefore, they look at crowded markets as an important signal about the legitimacy and viability of specific components for their needs. Through their presence in crowded markets, ESS firms can signal their commitment to many of the components that customers might need for their digital platforms. Customers might find that such firms are attractive because their commitments to crowded markets can mitigate concerns about compatibilities between the components purchased across several markets. This unique potential for demand externality across markets suggests that ESS vendors might, in fact, benefit from competing in many crowded markets. We test our explanations through data across three time periods from a set of ESS firms that account for more than 95% of the revenue in this market. We find that ESS firms do reap performance benefits by competing in crowded markets. More importantly, we find that they can enhance their benefits from crowded markets if they face the same competitors in multiple markets, thereby increasing their multimarket contact with rivals. These results have interesting implications not just for understanding competitive conduct in the ESS industry but also in many of the emerging digital goods industries where the markets have similar competitive characteristics to the ESS industry. Our ideas complement emerging ideas about platform models of competition in the digital goods industry and provide important directions for future research.

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