Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/13362
Title: Relative industry concentration and customer-driven IT spillovers
Authors: Cheng, Z 
Nault, BR
Keywords: Business value of IT
Economics of is
Industry concentration
Input-output tables
IT-enabled supply chains
Production function framework
Spillovers
Issue Date: 2012
Publisher: Institute for Operations Research and the Management Sciences
Source: Information systems research, 2012, v. 23, no. 2, p. 340-355 How to cite?
Journal: Information systems research 
Abstract: We examine how one industry's productivity is affected by the IT capital of its customers and how this effect depends on industries' relative concentration. These customer-driven IT spillovers result from customers' IT investments in various information systems that reduce transaction costs through information sharing and coordination and lead to more efficient production and logistics upstream. The magnitude of IT spillovers depends on relative industry concentration because customers in more concentrated industries relative to those of their suppliers are better able to retain the benefits from their IT investments. We model customer-driven effects based on production theory and empirically test the model using two industry-level data sets covering different and overlapping time periods (1987-1999 and 1998-2005), different scopes of the economy (manufacturing only versus all industries), and different levels of industry aggregation. We find that, given an increase in a downstream industry's IT capital, there is a significant increase in downstream industry output as well as significant increases in upstream industry output. Moreover, the magnitude of IT spillovers is related to relative industry concentration: A 1% decrease in a customer's relative industry concentration increases spillovers by roughly 1%. Thus, further increases in IT capital can be justified along the supply chain, and an industry's relative concentration-which can reflect market power-in part determines the distribution of productivity benefits.
URI: http://hdl.handle.net/10397/13362
ISSN: 1047-7047
EISSN: 1526-5536
DOI: 10.1287/isre.1100.0345
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