| Today, information technology (IT) investments are an indispensable part of business strategies. Firms all over the world spend billions of dollars every year to generate economic value and to stay competitive. Although businesses show an unprecedented interest in IT applications, different firms obtain different outcomes from their IT investments. The existing literature argues that a firm's ability to sustain and appropriate the value created through IT investment depends critically on the presence of a strategic resource advantage to leverage the technology. However, there is a growing recognition that strategic resource advantage is hard to sustain in today's competitive business environment. While the resource-based view contends that firms do not enjoy any economic value in the absence of strategic resources, I find that the common wisdom holds only under some special cases. I show that when IT provides precise information about the product market firms can appropriate benefits of their IT investments, even if neither firm has any strategic advantage. I posit that the existence of a strategic resource advantage is neither a necessary nor a sufficient condition for the creation of sustainable value with IT.; The majority of academic studies that investigate the returns on IT investments have attempted to untangle the relationships between IT investment and its value, especially in terms of improvements in productivity and profitability. However, it has been argued that the justification of IT based solely on the value improvement may not be appropriate since the success of an IT application is contingent up on its ability to create competitive advantage. Although recent empirical studies have found that IT produces positive value for adopting firms, this does not necessarily imply that IT delivers competitive edge, especially when firms are faced with an increased convergence in technologies and strategic resources. I argue that the value of IT and competitive advantage are different concepts and one does not necessarily guarantee the other. I show that the market and technology characteristics are critical for a firm to enjoy competitive advantage as well as the value of IT.; Nowadays, firms often hustle to adopt IT before their rivals in order to gain some timing advantage. However, early IT adoption often poses risk and uncertainty. I find that the first mover over invests if it does not know the effectiveness of IT when determining its IT investment. I also find that advantages of early adoption are outweighed by the disadvantages associated with the risk and uncertainty in some cases, leading the follower to gain competitive advantage. |
