IT-Enabled Competitive Advantage: The Strategic Role of IT on Dynamic Capabilities in Collaborative Product Development Partnerships

(Research Seminar, February 13, 2003)

Paul A. Pavlou

Marshall School of Business, University of Southern California

Abstract

This study describes how IT can be strategically used as a source of differential performance outcomes in rapidly changing environments. Drawing from the dynamic capabilities view (Teece, Pisano, and Shuen 1997), a sustainable competitive advantage results from the ability to continuously improve, innovate, and reconfigure resources to match evolving environmental needs. ‘Resource reconfigurability’ is herein proposed as a dynamic capability that enables managers to create new productive configurations of functional competencies by detecting new opportunities and recombining existing resources in innovative ways. The resource reconfigurability construct is proposed as a higher-order structure, formed by at least four underlying factors - coordination competence, absorptive capacity, collective mind, and entrepreneurial alertness. IT competence is posited as a critical antecedent of resource reconfigurability, acting as the enabling platform upon which reconfiguration occurs. IT competence is also a higher order formative structure, formed by the effective use of project management systems, knowledge management systems, and cooperative work systems. The nomological framework by which strategic IT competence influences competitive advantage through the key mediating variable of resource reconfigurability is also enhanced by examining the role of trust and environmental turbulence as additional antecedents of collaborative dynamic capabilities. The proposed IT-enabled dynamic capability is a complex, scarce, heterogeneous, and valuable combination that is unlikely to be replicated, imitated, or substituted by the competition, forming the basis for competitive advantage.

The proposed structural model is applied to collaborative new product development (NPD) partnerships where strategic groups frequently reconfigure their resources to create superior process efficiencies and product quality and innovation. This dissertation study uses a combination of field interviews and survey methodology. Following 33 semi-structured interviews, the main empirical study with data from 93 NPD managers provides quantitative support for the proposed hypotheses, highlighting the role of IT as an enabler of transformation and strategic flexibility. The results also support the proposed higher-order formative structures of resource reconfigurability and IT competence. A second confirmatory empirical study is in progress.

This study makes several theoretical, empirical, and managerial contributions to the strategic role of IT on competitive advantage. The proposed model identifies, defines, and articulates the mediating effects involved in the IT-competitive advantage relationship, providing a better understanding of the process by which IT influences differential performance outcomes. The author discusses the study’s implications, stressing the need for reconceptualizing the role of IT in contemporary organizations.