Information technology and information goods intensity as predictors of organizational expansion activity

The electronic markets hypothesis (EMH) holds that information technology (IT) use will influence the dismantling of fixed vertical firm boundaries by reducing the cost of transaction for the acquisition of input goods between firms. According to the EMH, firms will use technology in the value chain in place of firm ownership. Thus, the EMH predicts a rise in electronically coordinated vertical markets as a result of information technology deployment. It is possible that an evolution toward electronic markets will be empirically evident via increases in network alliance agreements between vertically allied kinds of firms (Malone, Yates and Benjamin, 1987).; Yet, anecdotal evidence of intense vertical and horizontal merger and alliance boundary expanding activity for information goods producing firms seems to be only partially explained by predictions of an IT-driven rise in electronic vertical market coordination structures. This dissertation blends transaction cost economics with information economics to yield a research model that may more thoroughly explain and predict vertical and horizontal boundary change behavior for information goods intense producing firms (IGIPF) and non-information goods intense producing firms (non-IGIPF) with differing amounts of information technology deployment.; The dissertation research model separates the economic effects of a firm's use of information technology in production on the internal governance of the production and distribution sequence (vertical organizational boundaries) and external market structures (horizontal organizational boundaries), from the economic effects of the degree of information in the firm's product line on internal governance and external market structures. The research reported here explores if firms that produce higher levels of information goods have different vertical and horizontal organizational boundaries when compared to non-information goods intense producing firms, even when these firms have similar levels of IT deployment.; Two years of horizontally and vertically coded event study merger and alliance data for 317 of the 1,085 largest, publicly traded, U.S. headquartered firms indicate that the model and some of the research hypotheses are supported. Experts used firm product sales information and the North American Industry Classification System (NAICS) taxonomy to reliably define the information goods production intensity of the firm. Information technology expenditures for the firms were obtained from a Computerworld, Inc. survey. There were 936 horizontal alliances across 161 firms, and 645 horizontal mergers for 196 firms. For the 317 firms, 19 vertical mergers were reported for 12 firms, and there were 102 vertical alliances for 31 firms. (Abstract shortened by UMI.)...