Deriving Business Value from IT Applications in Product Development: A Complementarities-Based Model - Information Technology and Product Development - page 37

use: (1) automation of routine tasks, (2) emphasis on the use of skilled labor and
an increased emphasis on recruitment and training, (3) decentralization of decision
making, (4) increased vertical and lateral information flow, and (5) emphasis on
performance-based incentives.
We propose two distinct causal chains linking these elements and business value.
In the first chain, we propose that some of these elements reinforce the effects of IT
deployment on business value (link B in Fig. 2.1). In the second chain, we propose
that these practices also reinforce the effects of IT investment on the level of IT
deployment (link C in Fig. 2.1). These proposed causal chains are captured in the
following two propositions:
Proposition 4a: The effects of IT innovation deployment on business value will be
reinforced by modern organizational architectures.
Proposition 4b: The effects of IT investment on IT innovation deployment will be
reinforced by modern organizational architectures.
Brynjolfsson (2003) gives a nice discussion of how modern organizational archi-
tecture reinforces the relationship between IT investment and business value. We
expand on that by bringing IT deployment into the analysis. In particular, in
Table 2.3 we provide rationales for how these five elements each reinforce the IT
deployment ⇒ business value relationship, and in some cases, the IT investment

⇒

IT deployment relationship. We also provide examples, where possible, from the
Cisco System case.

2.6.5 Firm-Level Complements as a Driver for IT Investment

A large number of studies have confirmed a strong positive association between
the aggregate level of IT investment and realized business value, thus dispelling the
myth that IT investments do not pay off (Barua & Mukhopadhyay, 2000).
We posit two explanations for the strong relationship between IT investment and
business value. First, as we have been arguing all along, firms often join IT invest-
ment with organizational elements (complementary strategies, IT capabilities, and
modern organizational architectures) that magnify or reinforce the value of those
investments. Payoffs do not result from IT investment per se, but rather from how
those investments are combined with other organizational elements.
However, perhaps more importantly, we suggest that firms that are well posi-
tioned in terms of organizational complements will be likely to invest more in
IT to begin with. That is, we posit that these firm-level organizational comple-
ments can also drive the decisions related to IT investments. For example, senior
managers will recognize when they have business strategies that have potential
synergies with IT use and may formulate or support plans for specific IT invest-
ments. Similarly, they will recognize when their IT capabilities are strong and the
potential synergies this has with IT use may create environments conductive for IT
investment.