A tough pill to swallow? The lessons learned from mandatory RFID adoption

Abstract

On some occasions, information technology (IT) is mandated rather than voluntary. However, the impact of mandatory IT adoption receives little attention in the operations management literature, and the literature shows divergent predictions about how mandatory IT affects financial performance. Using the case of mandatory radio-frequency identification (RFID) adoption in manufacturing industries, this study applies long-horizon event study to examine 95 U.S. listed firms that have adopted mandatory RFID. The results show that firms achieve significantly strong financial performance from mandatory adoption. Mandatory RFID is particularly beneficial for firms with good financial health, late adopters and high-clockspeed firms. The current study provides a deeper understanding of supplier benefits from mandatory systems supported by dominant customers. Based on the lessons learned from past mandatory RFID adoption, the present study can serve as guidance for future projects and contribute to the literature on operations management and information systems.