Deriving Business Value from IT Applications in Product Development: A Complementarities-Based Model - Information Technology and Product Development - page 42

While we believe the model as proposed achieves a nice balance between rich-
ness and parsimony as it is, we see some especially promising ways to extend the
model. One such extension is to add non-IT functional capabilities to the macro-
level of the model. This would be particularly appropriate for those emerging IT
systems used primarily within a particular functional area. To return to the PLM
example, we expect that product development capabilities, broadly defined, will
have complementarities with PLM deployment.
Another intriguing extension would be to incorporate the idea of innovation-path
complementarities . Just as a technology can possess complementarities with organi-
zational features, they can also possess complementarities with other technologies
that already exist, or more interestingly, are yet to come. Smith (2004) develops
these ideas in an examination of the adoption of “linked technologies,” where
adoption of a technology in one period has complementarities with technologies
introduced later.
The study by Zhu (2004) can be seen as illustrating the structure of innovation-
path complementarities. This study demonstrates complementarities between IT
infrastructure - operationalized primarily as the installed base of IT equipment -
and e-commerce capabilities - measured as the sophistication of firm's website
and the degree of integration between the website and the back-end systems.
Innovation-path complementarities could exist either because one technology inter-
acts with another on a technical level, or because the knowledge gained during
implementation of one technology pertains to another.
Returning to the PLM example, we might posit innovation-path complementar-
ities with the prior deployment of related technologies (e.g., CAD/CAM, PDM).
We might also posit innovation-path complementarities with the deployment of sys-
tems that require similar kinds of implementation strategies and knowledge, such as
CRM or ERP. It is worth noting that the kernel of this idea does already reside in
our proposed model, in that IT technology assets are posited as a dimension of IT
capabilities. However, we see the potential for greater development of this concept,
and the opportunity to draw interesting connections between innovation-path com-
plementarities and other innovation concepts, such as absorptive capacity (Zahra
& George, 2002) and the real-options perspective on new technology investment
(Fichman, 2004).
Our model holds implications for managerial practice. First, our model pro-
vides a rationale for investing in IT capabilities that support product development
in conjunction with investments in other types of product development capability
(for example, development process maturity). Such investments can be particu-
larly difficult to justify based on directly observable benefits, and as such, the
insights from our model will likely contribute toward adopting a more holistic IT
investment decision-making framework. Further, the often found “symmetry” in
complementarities effects also imply the potential contribution of IT deployment
toward enhancing the returns from investments in other organizational elements
(e.g., product development team management practices). This implies the need for
IT managers as well as senior business managers to include such considerations
while evaluating innovative IT investment opportunities.