Competitive Advantage from Information Systems
From Information Systems at Pitt Business
One of the largest investments for organizations is for software applications acquisition, development and customization with the hope of providing some competitive advantage for the organization. However, it is difficult to determine whether an application is able to provide an actual competitive advantage or not. It is important that an organization have the ability to assess the advantage provided by acquired applications.
This paper explains the development of a multi-dimensional construct that assesses the competitive advantage provided by an information technology application (CAPITA). A survey of 185 IS executives revealed that this construct has 9 dimensions, which are noted below:
1. Primary activity efficiency: consists of the effect of the IT application on the cost of: inbound logistics, operations, outbound logistics, and service (i.e., the physical creation of the product and its sale and transfer to the buyer, as well as after sale service) 2. Support activity efficiency: comprised of the impact of the IT application on the cost of: human resource management, firm infrastructure, and coordination of different activities (e.g., aspects of the support value chain) 3. Resource management functionality: measures how well the IT applications assists its primary users in meeting the following needs: monitor utilization, upgrade, transfer and dispose and account (i.e., the post acquisition management of a resource or product) 4. Resource acquisition functionality: the application's impact on the acquisition phase of the resource lifecycle 5. Threat: the impact of the application on: the firm's ability to evaluate and choose from alternative suppliers, switching costs, ability to threaten vertical integration, ability to evaluate and choose alternative customers, customer's cost of locating alternative suppliers, and customer's searching costs. 6. Preemptiveness: consists of unique access to channels, ability to force competitors to adopt less favorable market postures, influence over the industry legal barriers (e.g., copyrights, patents). 7. Synergy: represents the applications alignment with business strategy
[edit] Abstract
In order to measure the extent to which information technology provides competitive advantage, the construct "Competitive Advantage Provided by an Information Technology Application" (CAPITA) was operationalized. A field survey gathered data from 185 top information systems executives regarding information technology applications which had been developed to gain competitive advantage. A confirmatory analysis revealed that CAPITA may be conceptualized in terms of nine dimensions which satisfy key measurement criteria including unidimensionality and convergent validity, discriminant validity, predictive validity, and reliability. The nine dimensions form the basis of a preliminary multidimensional measure or index of competitive advantage which has practical uses for competitive assessment. These include justifying and evaluating applications and acting as dependent variables in empirical competitive advantage research. Extensions entail formulating alternative measures of CAPITA to clarify the theoretical foundations of the construct, validating the latent-structure model on another data set, use of multiple informants for data collection, and exploring complex factor structures for the construct.
[edit] Paper Information
Authors: Sethi Vijay, William King
Check out the paper at Development of Measures to Assess the Extent to Which an Information Technology Application Provides Competitive Advantage
This article was originally published in Management Science, Vol 40, No. 12, December 1994.
[edit] Keywords
Information technology, competitive advantage, measurement scales, multidimensional modeling
