Deriving Business Value from IT Applications in Product Development: A Complementarities-Based Model

  • Robert G. Fichman
  • Satish Nambisan
Part of the Annals of Information Systems book series (AOIS, volume 5)


Many companies that have made considerable investments in IT applications to support their product development activities have realized limited value from such efforts. In this chapter, we argue that a deep understanding of the complementarities that exist in the product development context is critical to ensure that business value is derived from the IT applications. We propose a multi-level complementarities-based model of IT innovation and business value to explain the factors that shape the success of IT-enabled product development. Our model posits that firms will obtain more value from innovative IT investment initiatives when the resulting IT applications are fitted into a system of initiative or product development context-specific complementary organizational elements (strategies, structures, processes, etc.). Further, firms will get more value from IT initiatives when investment is combined with certain firm-level elements such as a business strategy that is especially amenable to IT support, strong IT capabilities, and a modern organizational architecture that incorporates a cluster of practices associated with “digital” organizations. The model can guide researchers and managers in identifying the firm-level pre-conditions for realizing value from investments in IT to support product development and specifying necessary complementary investments in organizational change associated with product development.


Customer Relationship Management Enterprise Resource Planning Human Resource Practice Organizational Element Complementarity Effect 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


  1. Austin, R. D., Nolan, R. L., & Cotteleer, M. J. (2002). Cisco systems, Inc.: Implementing ERP. Boston: Harvard Business School, Case #9-699-022.Google Scholar
  2. Barua, A., & Mukhopadhyay, T. (2000). Information technology and business performance: Past, present and future. In R. W. Zmud (Ed.), Framing the domains of IT management: Projecting the future through the past. Cincinnati, OH: Pinnaflex Educational Resources.Google Scholar
  3. Bharadwaj, A. S. (2000). A resource-based perspective on information technology capability and firm performance: An empirical investigation. MIS Quarterly, 24(1), 169–196.CrossRefGoogle Scholar
  4. Bharadwaj, A. S., Sambamurthy, V., & Zmud, R. W. (1999). IT capabilities: Theoretical perspectives and empirical operationalization. Proceedings of the Twentieth International Conference on Information Systems, Charlotte, NC.Google Scholar
  5. Bresnahan, T., Brynjolfsson, E., & Hitt, L. M. (2002). Information technology, workplace organization, and the demand for skilled labor: Firm-level evidence. Quarterly Journal of Economics, 117(1), 339–376.CrossRefGoogle Scholar
  6. Brynjolfsson, E. (2003). The IT productivity gap. Optimize, 21.Google Scholar
  7. Brynjolfsson, E., & Hitt, L. (1996). Paradox lost? Firm-level evidence on the returns to information systems spending. Management Science, 42(4), 541–558.CrossRefGoogle Scholar
  8. Brynjolfsson, E., & Hitt, L. M. (2003). Computing Productivity: Firm Level Evidence. Review of Economics & Statistics, 85(4), 793–808.CrossRefGoogle Scholar
  9. Brynjolfsson, E., Renshaw, A. A., & Van Alstyne, M. (1997). The Matrix of Change. Sloan Management Review, 38(2), 22–40.Google Scholar
  10. Bylinsky, G. (2004). Not Your Grandfather's Assembly Line. Fortune, 150(1), 136B–136H.Google Scholar
  11. Chan, Y. E., Huff, S. L., Barclay, D. W., & Copeland, D. G. (1997). Information Systems Research. Business Strategic Orientation, Information Systems Strategic Orientation, and Strategic Alignment, 8(2), 125–150.Google Scholar
  12. CIM. 2008. CIM Data Predicts Strong PLM Market Growth for 2007.
  13. Colombo, M. G., & Mosconi, R. (1995). Complementarity and cumulative learning effects in the early diffusion of multiple technologies. Journal of Industrial Economics, 43(1), 13–48.CrossRefGoogle Scholar
  14. Cooper, R. G., & Kleinschmidt, E. J. (2001). Portfolio management for new product development: Results of an industry practices study. R&D Management, 31(4).Google Scholar
  15. Cooper, R. B., & Zmud, R. W. (1990). Information technology implementation research: A technological diffusion approach. Management Science, 36(2), 123–139.CrossRefGoogle Scholar
  16. Davenport, T. H., & Short, J. E. (1990). The new industrial engineering: information technology and business process redesign. Sloan Management Review, 31(4), 11–27.Google Scholar
  17. Dehning, B., Richardson, V. J., & Zmud, R. W. (2003). The value relevance of announcements of transformational information technology investments. MIS Quarterly, 27(4), 637–656.Google Scholar
  18. DeSanctis, G., & Poole, M. S. (1994). Capturing the complexity in advanced technology use: Adaptive structuration theory. Organization Science, 5(2), 121–147.CrossRefGoogle Scholar
  19. Devaraj, S., & Kohli, R. (2003). Performance impacts of information technology: Is actual usage the missing link? Management Science, 49(3), 273–289.CrossRefGoogle Scholar
  20. Dos Santos, B. L., & Peffers, K. (1995). Rewards to investors in innovative information technology applications: First movers and early followers in ATMs. Organization Science, 6(3), 241–259.CrossRefGoogle Scholar
  21. Fichman, R. G. (2000). The diffusion and assimilation of information technology innovations. In R. B. Zmud (Ed.), Framing the domains of IT management: Projecting the future through the past. Cincinnati, OH: Pinnaflex Educational Resources, Inc.Google Scholar
  22. Fichman, R. G. (2004). Real options and IT platform adoption: Implications for theory and practice. Information Systems Research, 15(2), 132–154.CrossRefGoogle Scholar
  23. Gawer, A., & Cusumano, M. (2002). Platform Leadership: How Intel, Microsoft, and Cisco drive industry innovation. Boston, MA: Harvard Business School Press.Google Scholar
  24. Grieves, M. (2006). Product lifecycle management: Driving the next generation of lean thinking. New York: McGraw-Hill.Google Scholar
  25. Hart, P., & Saunders, C. (1997). Power and trust: Critical factors in the adoption and use of electronic data interchange. Organization Science, 8(1), 23–42.CrossRefGoogle Scholar
  26. Hitt, L. M., & Brynjolfsson, E. (1997). Information technology and internal firm organization: An exploratory analysis. Journal of Management Information Systems, 14(2), 81–101.Google Scholar
  27. Hitt, L. M., Wu, D. J., & Zhou, X. (2001). Investment in enterprise resource planning: Business impact and productivity measures. Journal of Management Information Systems, 19(1), 71–98.Google Scholar
  28. Karimi, J., Somers T. M., & Bhattacherjee, A. (2007). The impact of ERP implementation on business process outcomes: A factor-based study. Journal of Management Information Systems, 24(1), 101–134.CrossRefGoogle Scholar
  29. Kohli, R., & Devaraj, S. (2003). Measuring information technology payoff: A meta-analysis of structural variables in firm-level empirical research. Information Systems Research, 14(2), 127–145.CrossRefGoogle Scholar
  30. Laursen, K., & Foss, N. J. (2003). New human resource management practices, complementarities, and the impact on innovation performance. Cambridge Journal of Economics, 27(2),243–263.CrossRefGoogle Scholar
  31. Lee, C.-H. S., Barua, A., & Whinston, A. B. (2000). The complementarity of mass customization and electronic commerce. Economics of Innovation & New Technology, 9(2), 81–109.CrossRefGoogle Scholar
  32. Leonard-Barton, D. (1988). Implementation as mutual adaptation of technology and organization. Research Policy, 17(5), 251–267.CrossRefGoogle Scholar
  33. Liker, J. K., Fleischer, M., & Arnsdorf, D. (1992). Fulfilling the promises of CAD. Sloan Management Review, 33(3), 74–86.Google Scholar
  34. Lyytinen, K., & Mathiassen, L. (1998). Attention shaping and software risk – a categorical analysis of four classical risk management approaches. Information Systems Research, 9(3), 233–255.CrossRefGoogle Scholar
  35. Markus, M. L. (1987). Toward a “Critical Mass” Theory of interactive media: Universal access, interdependence and diffusion. Communications Research, 14(5), 491–511.CrossRefGoogle Scholar
  36. Markus, M. L., & Robey, D. (1988). Information technology and organizational change: Causal structure in theory and research. Management Science, 34(5), 583–598.CrossRefGoogle Scholar
  37. Markus, M. L., & Soh, C. (1993) Banking on information technology: Converting IT spending into firm performance. In R. Banker, R. Kauffman, & M. A. Mahmood (Eds.), Strategic information technology management (pp. 375–403). Harrisburg, PA: Idea Group Publishing.Google Scholar
  38. Melville, N., Kraemer, K., & Gurbaxani, V. (2004). Review: Information technology and organizational performance: An integrative model of IT business value. MIS Quarterly, 28, 283–322.Google Scholar
  39. Meyer, M., & Lehnerd, A. P. (1997). The power of product platforms. New York: The Free Press.Google Scholar
  40. Milgrom, P., & Roberts, J. (1990). The economics of modern manufacturing: Technology, strategy and organization. American Economic Review, 80(3), 511–528.Google Scholar
  41. Milgrom, P., & Roberts, J. (1995). Complementarities and fit: Strategy, structure, and organizational change in manufacturing. Journal of Accounting & Economics, 19(2/3), 179–208.CrossRefGoogle Scholar
  42. Mishra, A. N., Konana, P., & Barua, A. (2007). Antecedents and consequences of Internet use in procurement: An empirical investigation of U.S. manufacturing firms. Information Systems Research, 18(1), 103–120.CrossRefGoogle Scholar
  43. Nambisan, S., & Wang, Y. (2000). Web technology adoption and knowledge barriers. Journal of Organizational Computing & Electronic Commerce, 10(2), 129–147.CrossRefGoogle Scholar
  44. Nerkar, A., & Roberts, P. W. (2004). Technological and product–market experience and the success of new product introductions in the pharmaceutical industry. Strategic Management Journal, 25(8/9), 779–799.CrossRefGoogle Scholar
  45. Nolan, R. L. (2001). Cisco systems: Web-enablement. Boston: Harvard Business School, Case #9-301-056.Google Scholar
  46. Orlikowski, W. J. (1992). The duality of technology: Rethinking the concept of technology in organizations. Organization Science, 3(3), 398–427.CrossRefGoogle Scholar
  47. Orlikowski, W. J. (1996). Improvising organizational transformation over time: A situated change perspective. Organization Science, 7(1), 63–92.Google Scholar
  48. Powell, T. C., & Dent-Micallef, A. (1997). Information technology as competitive advantage: The role of human, business, and technology resources. Strategic Management Journal, 18(5), 375–405.CrossRefGoogle Scholar
  49. Purvis, R. L., Sambamurthy, V., & Zmud, R. W. (2001). The assimilation of knowledge platforms in organizations: An empirical investigation. Organization Science, 12(2), 117–135.CrossRefGoogle Scholar
  50. Ramamurthy, K., Premkumar, G., & Crum, M. R. (1999). Organizational and interorganizational determinants of EDI diffusion and organizational performance: A causal model. Journal of Organizational Computing and Electronic Commerce, 9(4), 253–285.CrossRefGoogle Scholar
  51. Rogers, E. M. (2003). Diffusion of Innovations (5th ed.). New York: The Free Press.Google Scholar
  52. Ross, J. W., & Beath, C. M. (1996). Develop long-term competitiveness through IT Assets. Sloan Management Review, 38(1), 31–42.Google Scholar
  53. Saaksvuori, A. (2008). Product lifecycle management (3rd ed.). NewYork: Springer.Google Scholar
  54. Smith, M. (2004). A model of the linked adoption of complementary technologies. Economics of Innovation and New Technology, 13(1), 91–99.CrossRefGoogle Scholar
  55. Soh, C., & Markus, M. L. (1995). How IT creates business value: A process theory synthesis. In G. Ariav, C. Beath, J. I. DeGross, R. Hoyer, & C. F. Kemerer (Eds.), Proceedings of the sixteenth international conference on information systems (pp. 29–41). Amsterdam: ACM.Google Scholar
  56. Subramanian, A., & Nilakanta, S. (1996). Organizational innovativeness: Exploring the relationship between organizational determinants of innovation, types of innovations, and measures of organizational performance. Omega-International Journal of Management Science, 24(6), 631–647.CrossRefGoogle Scholar
  57. Swanson, E. B. (1994). Information systems innovations among organizations. Management Science, 40(9), 1069–1092.CrossRefGoogle Scholar
  58. Swanson, E. B., & Ramiller, N. (2004). Innovating mindfully with information technology. MIS Quarterly, 28(4), 553–583.Google Scholar
  59. Tanriverdi, H., & Venkatraman, N. (2005). Knowledge relatedness and the performance of multibusiness firms. Strategic Management Journal, 26(2), 97–119.CrossRefGoogle Scholar
  60. Teo, H. H., Wei, K. K., & Benbasat, I. (2003). Predicting intention to adopt interorganizational linkages: An institutional perspective. MIS Quarterly, 27(1), 31.Google Scholar
  61. Tyre, M. J., & Orlikowski, W. J. (1993). Exploiting opportunities for technological improvement. Sloan Management Review, 35(1), 13–26.Google Scholar
  62. Tyre, M. J., & Orlikowski, W. J. (1994). Windows of opportunity: temporal patterns of technological adaptation in organizations. Organization Science, 5(1), 98–118.CrossRefGoogle Scholar
  63. Venkatesh, V., Morris, M. G., Davis, G. B., & Davis, F. D. (2003). User acceptance of information technology: Toward a unified view. MIS Quarterly, 27(3), 425–478.Google Scholar
  64. Wade, M., & Hulland, J. (2004). Review: the resource-based view and information systems research: review, extension, and suggestions for future research. MIS Quarterly, 28(1), 107–142.Google Scholar
  65. Weill, P. (1992) The relationship between investment in information technology and firm performance: A study of the valve manufacturing sector. Information Systems Research, 3(4), 307–333.CrossRefGoogle Scholar
  66. Zahra, S. A., & George, G. (2002). Absorptive capacity: A review, reconceptualization, and extension. Academy of Management Review, 27(2), 185–203.CrossRefGoogle Scholar
  67. Zhu, K. (2004). The complementarity of information technology infrastructure and e-commerce capability: A resource-based assessment of their business value. Journal of Management Information Systems, 21(1), 167–202.Google Scholar

Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  1. 1.Carroll School of ManagementChestnut HillUSA
  2. 2.Lally School of ManagementRensselaer Polytechnic InstituteTroyNY

Personalised recommendations