Strategic Responses to New Technologies and Their Impact on Firm Performance

Abstract

Modern corporations must adopt and assimilate new technologies to build and sustain competitive advantage. The authors develop a theoretical framework to understand the relationships among (1) strategic responses to new technologies, (2) organizational resources, and (3) firm performance. Specifically, they theorize that a strategic response can be categorized according to the dimensions of magnitude, domain, and speed, and they conceptualize organizational resources as tangible and intangible. The authors operationalize this framework for the adoption of the Internet by traditional store-based retailers, for which they posit strategic responses as the speed of (1) adopting the Internet as a communications channel, (2) adopting the Internet as a sales channel, and (3) forming e-alliances. In addition, they use resource slack to represent organizational resources. Results from nine years (1992–2000) of data on 106 firms establish the influence of strategic responses on firm performance (i.e., market valuation of the firm, operationalized as Tobin's q). Specifically, the results show that both the adoption of the Internet as a communications channel and e-alliance formation positively influence firm performance. The positive effect of communications channel adoption on firm performance is enhanced further by the use of slack resources. Post hoc analysis reveals that the adoption of the Internet as a sales channel seems to matter only to firms that have preexisting catalog operations.