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The Impact of information technology capability on alliance design and performance

Author: Lioukas, Constantinos S. ; Zollo, MaurizioINSEAD Area: Strategy Series: Working Paper ; 2006/37/ST Publisher: Fontainebleau : INSEAD, 2006.Language: EnglishDescription: 42 p.Type of document: INSEAD Working Paper Online Access: Click here Abstract: Many changes in the forms of interfirm cooperation have been attributed to advances in information and communication technologies that allow firms to exchange a large amount of information at low cost. However, few studies have attempted to examine these relationships. The primary goal of this paper is to investigate the impact of firms' information technology (IT) capabilities on (i) the design of strategic alliances and (ii) alliance performance. Two aspects of the alliance design are examined: the governance structure and the alliance scope. Contrary to the received wisdom from transaction cost economics, the results show that IT capability leads to alliances with more hierarchical governance structures. Results also show that IT capability either shrinks or expands the alliance scope depending on the nature of the alliance task, and in particular on task analyzability. Finally, firms derive greater benefits from an alliance when they design the alliance so as to leverage their IT capability. Two broader theoretical implications are derived: the first has to do with the boundaries between the contractual and competence perspectives, while the second extends the resource-based view by suggesting how alliances can be designed to leverage a certain class of resources and capabilities.
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Many changes in the forms of interfirm cooperation have been attributed to advances in information and communication technologies that allow firms to exchange a large amount of information at low cost. However, few studies have attempted to examine these relationships. The primary goal of this paper is to investigate the impact of firms' information technology (IT) capabilities on (i) the design of strategic alliances and (ii) alliance performance. Two aspects of the alliance design are examined: the governance structure and the alliance scope. Contrary to the received wisdom from transaction cost economics, the results show that IT capability leads to alliances with more hierarchical governance structures. Results also show that IT capability either shrinks or expands the alliance scope depending on the nature of the alliance task, and in particular on task analyzability. Finally, firms derive greater benefits from an alliance when they design the alliance so as to leverage their IT capability. Two broader theoretical implications are derived: the first has to do with the boundaries between the contractual and competence perspectives, while the second extends the resource-based view by suggesting how alliances can be designed to leverage a certain class of resources and capabilities.

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