Download this Paper Open PDF in Browser

Scale Without Mass: Business Process Replication and Industry Dynamics

47 Pages Posted: 16 Apr 2007 Last revised: 7 Oct 2008

Erik Brynjolfsson

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Andrew McAfee

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Michael Sorell

IMD International

Feng Zhu

Harvard University - Harvard Business School

Date Written: September 30, 2008

Abstract

In the mid-1990s, productivity growth accelerated sharply in the U.S. economy. In this paper, we identify several other industry-level changes that have occurred during the same time and argue that they are consistent with an increased use of information technology (IT). We use case studies to illustrate how IT has enabled firms to more rapidly replicate improved business processes throughout an organization, thereby not only increasing productivity but also market share and market value. We then empirically document a substantial increase in turbulence starting in the 1990s, as measured by the average intra-industry rank change in sales, earnings before interest, taxes, depreciation and amortization (EBITDA), and other metrics. In particular, we find that IT-intensive industries account for most of this increase in turbulence, especially after 1995. In addition, we find that IT-intensive industries became more concentrated than non IT-intensive industries after 1995, reversing the previous trend. The combination of increased turbulence and concentration, especially among IT-intensive industries, is consistent with recent theories of hypercompetition as well as Schumpeterian creative destruction. We conclude that the improved ability of firms to replicate business innovations has changed the nature of business competition.

Keywords: Business Process Replication, Hypercompetition, Creative Destruction, Information Technology, Turbulence, Concentration

JEL Classification: O51, E32, L11, L23, M11

Suggested Citation

Brynjolfsson, Erik and McAfee, Andrew and Sorell, Michael and Zhu, Feng, Scale Without Mass: Business Process Replication and Industry Dynamics (September 30, 2008). Harvard Business School Technology & Operations Mgt. Unit Research Paper No. 07-016. Available at SSRN: https://ssrn.com/abstract=980568 or http://dx.doi.org/10.2139/ssrn.980568

Erik Brynjolfsson

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

E53-313
Cambridge, MA 02142
United States
617-253-4319 (Phone)

HOME PAGE: http://digital.mit.edu/erik

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Andrew McAfee (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-416
Cambridge, MA 02142
United States
6177154155 (Phone)

HOME PAGE: http://andrewmcafee.org

Michael Sorell

IMD International ( email )

Ch. de Bellerive 23
P.O. Box 915
CH-1001 Lausanne
Switzerland

Feng Zhu

Harvard University - Harvard Business School ( email )

Soldiers Field Road
Morgan 431
Boston, MA 02163
United States

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=14938

Paper statistics

Downloads
1,204
Rank
13,073
Abstract Views
6,946