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Information Technology and Firm Boundaries: Evidence from Panel Data
Open accessAbstract
Previous literature has suggested that information technology (IT) can affect firm boundaries by changing the costs of coordinating economic activity within and between firms (internal and external coordination). This paper examines the empirical relationship between IT and firm structure and evaluates whether this structure is consistent with prior arguments about IT and coordination. We formulate an empirical model to relate the use of information technology capital to vertical integration and diversification. This model is tested using an 8-year panel data set of information technology capital stock, firm structure, and relevant control variables for 549 large firms. Overall, increased use of IT is found to be associated with substantial decreases in vertical integration and weak increases in diversification. In addition, firms that are less vertically integrated and more diversified have a higher demand for IT capital. While we cannot rule out all alternative explanations for these results, they are consistent with previous theoretical arguments that both internal and external coordination costs are reduced by IT.
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“Scholars describe SBO as an adoption predicator; the greater the scope of business, the more likelihood enterprises invest to digitalize operations and to reduce internal co-ordination costs, administrative complexities, and information processing (Bakos, 1998;Chopra & Meindl, 2001;Hitt, 1999;Zhu et al., 2003).”
From Using T-O-E theoretical framework to study the adoption of ERP solution (2016) · cites this paper as Hitt, 1999
In the citing paper
“The role of SBO as an adoption predicator has been variously confirmed (Hitt, 1999;Thong, 1999;Tornatzky & Fleischer, 1990;Zhu et al., 2003).”
From Using T-O-E theoretical framework to study the adoption of ERP solution (2016) · cites this paper as Hitt, 1999
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Metadata
- Authors
- Hitt, L. M.
- Affiliations
- University of Pennsylvania (US)
- Corresponding author
- Hitt, Lorin M.
- ORCID
- Hitt, Lorin M.
- Venue
- Information Systems Research
- Published
- 1999-06
- Volume
- 10
- Issue
- 2
- Pages
- 134-149
- ISSN
- 1047-7047 (ISSN-L)
- 1526-5536
- OpenAlex
- W1973836970
- Cited by
- 341
- References
- 30
- Citations by year
- 2026: 4 · 2025: 4 · 2024: 7 · 2023: 7 · 2022: 12 · 2021: 9 · 2020: 11 · 2019: 12 · 2018: 4 · 2017: 10 · 2016: 15 · 2015: 10 · 2014: 9 · 2013: 16 · 2012: 16
- FWCI
- 19.25
- Type
- journal article
- Language
- en
- Open access
- green
- repository.upenn.edu
- Locations
- Information Systems Research (publishedVersion)
- ScholarlyCommons (University of Pennsylvania) (submittedVersion)
- Topics
- Social Sciences › Business, Management and Accounting › Management Information Systems › Outsourcing and Supply Chain Management
- Social Sciences › Business, Management and Accounting › Management Information Systems › Information Technology Governance and Strategy
- Social Sciences › Economics, Econometrics and Finance › Economics and Econometrics › Merger and Competition Analysis
- Keywords
- firm boundaries, vertical integration, diversification, corporate structure, large corporations
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