Deriving Business Value from IT Applications in Product Development: A Complementarities-Based Model - Information Technology and Product Development - page 27

The macro-level of our model pertains to the influence of firm-level variables. As
noted in the reviews of empirical research on innovation and business value provided
earlier, several organizational elements have been found to complement innovation
and IT investment in general. Variables that enhance the effects of IT “in general”
would also tend to enhance the effects of IT “in particular” unless there is reason to
believe the focal IT is in some way unusual.
In our model, we organize these elements into three categories pertaining to
strategy, IT capabilities, and organizational architecture. While prior work has
empirically linked many of these firm-level complements to either innovation or
IT business value, our contribution is to combine them in an integrated model with
well-specified chains of causation. In particular, we posit two different causal chains
linking firm-level variables to IT business value, designated by letters B and C in
Fig. 2.1.
In the causal chain B, we posit that certain firm-level elements will increase the
returns to any given level of IT deployment. For example, when a technology com-
plements the firm's overall strategy, returns from deployment will be higher than
when it does not. As a separate causal chain (link C in Fig. 2.1), we argue that
these firm-level elements will actually promote more successful innovation deploy-
ment through complementarities with the level of IT investment. For example, firms
with greater IT capabilities should be better able to plan and manage complex
implementations of any given scope. Thus, according to this line of thinking, IT
capabilities will magnify the level of IT deployment produced from any given level
of IT investment.
As a final causal mechanism (link D in Fig. 2.1), we posit that firms will recog-
nize (explicitly or implicitly) when they hold complementary positions on firm-level
elements and will therefore be generally more aggressive when it comes to invest-
ing in emerging IT. This does not mean they will necessarily spend more on any
given investment initiative. In fact, we can expect that firms that are well posi-
tioned (e.g., have strong IT capabilities) will generally have to spend less to achieve
any given level IT deployment and business value. Furthermore, other things being
equal, deployments that go smoothly should cost less than those that go badly,
and ones that go smoothly should produce more business value. As a result, we
depart from the traditional practice in IT business value research and suggest that
the level of IT investment be measured using variables such as the timing of invest-
ment, extent of commitment to deployment, and the intended scope of deployment
(see Table 2.1). These measures avoid the paradoxes just mentioned and also have
strong linkages with the sorts of innovative behaviors examined in the IT innovation
stream.
To wrap up our model overview we discuss three caveats. First, the scope of
our model has been intentionally constrained by our interest in complementari-
ties. Therefore, we focus on variables that are plausibly involved in complementary
relationships with IT innovation or business value, and even with regard to those
variables, we focus on interaction effects consistent with complementarities and
give less attention to direct effects. Of course, there are many other variables that
potentially affect IT innovation or business directly (as noted in the survey articles