Deriving Business Value from IT Applications in Product Development: A Complementarities-Based Model - Information Technology and Product Development - page 31

complements. By contrast, it would probably be a misuse of complementarities
as an explanation for non-performance related impacts of technology and innova-
tion. Second, the focus in a complementarities analysis is on explaining synergies
between technology and organization as they relate to performance, rather than the
effects of each variable directly on performance. Third, complementarities often
involve symmetry between two elements, where not only A reinforces the effect of
B on C, but B reinforces the effect of A on C. While we focus on how organiza-
tional elements reinforce the effects of IT, we can often reverse the argument to
explain how IT reinforces the effects of the organizational elements. Finally, com-
plements often come in systems (or clusters ) of three or more elements, where
each element of the system reinforces the returns to every other element in the
system.
A careful analysis of the product development context would reveal a number of
other complementary initiative-specific organizational elements that could poten-
tially magnify the business value that the organization derives from the deployment
of the PLM application. Thus, overall, the above analysis not only demonstrates
how initiative-level complements would reinforce the impact of IT deployment on
business value, but also shows how through a careful evaluation of the four features
of complementarities-style analyses (focus on a performance variables, synergies,
symmetry, and systems of variables), we can isolate the complementarities effect
from other kinds relationships in such contexts.
2.6 The Macro-level of the Model: Firm-Level Organizational
Complements and IT Business Value
The organizational complements we examined in the prior section were specific to
a particular type of IT investment initiative. We now move from this micro-level to
the macro-level and consider the organizational complements that generalize to an
entire class of IT investments rather than a particular type of IT.
We posit three categories of firm-level organizational complements: business
strategy, IT capabilities, and organizational architecture. Unlike the micro-level
of the model, where complementarities have received less attention, there is con-
siderable prior work that considers complementarities at the macro-level, and our
selection of these three categories of variables is based in part on this prior
work. We also build on this literature by adding more precision to the considera-
tion of the complementarities effects involving these variables. More importantly,
by combining their complementarities effects with regard to IT investment and
with regard to IT deployment, we contribute toward a more holistic under-
standing of the role of firm-level organizational complements in IT innovation
and use.
We use a well-known business case to illustrate our arguments, in this instance,
Cisco Systems. In so doing, we follow the example of Milgrom and Roberts (1995)
who used a reanalysis of the classic Lincoln Electric business case to illustrate the
role of complementarities in modern manufacturing.