IT and Competition Networks: Implications for Innovation and Operating Performance

Abstract

Firms invest considerable resources into improving their operations and performance. Information technology (IT) and competition networks play an important role in operations by facilitating access to information and knowledge. However, the links between IT, competition networks and operating performance remain poorly understood. In this study, we develop a multilevel research model of operating performance that simultaneously considers the effects of IT for operational integration (ITOI, firm level), competitive brokerage (competition network level), and innovation efficiency (firm level). We assess the model using a 7-year (2004-2010) longitudinal secondary dataset including firms from multiple industries. We find that ITOI and competitive brokerage influence operating performance via innovation efficiency. We also find that ITOI and competitive brokerage are substitutes, as they provide similar information and knowledge access benefits to the firm. Taken together, these findings have relevant managerial implications. Specifically, we show that ITOI enhances operating performance, especially for firms that are not competitive brokers. We also show that in certain circumstances (e.g., when firms are competitive brokers) investing more in ITOI does not endow marginal benefits to operating performance. These findings are robust to concerns of endogeneity and alternative model specifications.

Keywords: competitive brokerage, innovation efficiency, operating performance, operational integration, substitution; IT for operational integration, competition networks, innovation efficiency, operating performance