GUEST EDITORIAL

Research perspectives on innovation through informationtechnology management in a networked world

Indranil R. Bardhan Æ Alok Gupta ÆPaul Tallon

Published online: 7 March 2008

� Springer Science+Business Media, LLC 2008

The role of IT in organizations has evolved from the exe-

cution of back-office transaction processing to enabling

strategic-level decisions. The rapid growth of new types of

IT such as wireless communications, mobile commerce,

inter-organizational systems, and Web 2.0 technologies

(such as social networking sites) has enabled firms to

develop new types of disruptive business models that

transcend organizational boundaries. Firms can tap soft-

ware development expertise and leverage these resources

across a global network, using collaboration tools to con-

nect employees with customers, suppliers, and business

partners. Firms can also tap into the expertise of their

extended value network, comprised of their partners, sup-

pliers, and customers, to solve problems creatively that

benefit the entire corporate ecosystem.

At the same time, technology evolution has given rise to

new challenges that frustrate both researchers and practi-

tioners. While there is widespread recognition of the

tremendous benefits IT can bring to firms, there is also a

fear that in an increasingly volatile and unstable world, IT

can sow the seeds of rigidity that inadvertently lock firms

into an outdated and increasingly ineffective business

strategy. Accordingly, the challenge facing firms that are

trying to remain at the head of their respective industries is

one of using IT to be innovative while remaining flexible in

the face of an unpredictable future. While prior research

has explored the role of IT in terms of its business impact

within organizations, little work has been done to explore

IT’s impact in the presence of network effects in an

increasingly networked world.

In this special issue of Information Technology and

Management, we have brought together five papers that

reflect the theme of IT-enabled innovation and its impact in a

networked world. Two of these papers were first presented at

the Tenth INFORMS Conference on Information Systems

and Technology (CIST) held in San Francisco in November

2005. We also invited other authors whose work resonates

with the theme of this special issue to submit their papers to

be considered for possible publication. In all, we invited

authors of six papers to consider having their work com-

petitively reviewed for possible publication in the special

issue. Our approach involved developmental reviewing

which entailed working with authors to improve the overall

quality of their submissions through constructive, yet chal-

lenging reviews. We also provided authors with the option of

submitting papers that were derivative works of their pre-

sentations at INFORMS CIST. Most papers underwent two

rounds of review; all papers were diligently and extensively

edited to ensure a uniform level of quality. We offer these

papers to the information systems research community with

the hope that readers will benefit from coverage of these

issues, as well as to provide a platform to deepen the research

dialogue in this emerging research domain.

This special issue begins with a theme piece, by Robert

Kauffman of Arizona State University and Ajay Kumar of

the Government of Kerala, India, titled ‘‘Network effects

and embedded options: Decision-making under uncertainty

for network technology investments.’’ The analysis of

network effects in technology-based networks continues to

I. R. Bardhan (&)

The University of Texas at Dallas, Richardson, TX, USA

e-mail: bardhan@utdallas.edu

A. Gupta

University of Minnesota, Minneapolis, MN, USA

e-mail: gupta037@csom.umn.edu

P. Tallon

Boston College, Boston, MA, USA

e-mail: paul.tallon@bc.edu

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Inf Technol Manage (2008) 9:147–148

DOI 10.1007/s10799-008-0038-x

be of significant managerial importance in e-commerce due

to the critical need for making better decisions related to

technology adoption and product launches. This article

examines settings involving countervailing and comple-

mentary network effects, which act as drivers of business

value at the industry or market level, as well as within firm-

or business process-specific contexts. It leverages real

options analysis for managerial decision-making under

uncertainty across these contexts. The authors develop a

hybrid jump-diffusion process to model countervailing and

complementary network effects from the perspective of a

user or a firm joining a network. Their analysis shows that

when countervailing and complementary network effects

occur in the same network technology context, they give

rise to real option value effects that may be used to control

or modify the valuation trajectory of a network technology.

From a practical perspective, this article provides a man-

agerial decision-making template through the different

kinds of deferral options that we identify for this IT anal-

ysis context.

The second paper is by Yu Liu and T. Ravichandran,

both from the Rensselaer Polytechnic Institute, who con-

tributed ‘‘A comprehensive investigation on the

relationship between information technology investments

and firm diversification.’’ This article empirically investi-

gates the role played by IT in diversified firms and tests the

relationship between IT investments and different types of

diversification: related, unrelated, and geographic diversi-

fication. Their results indicate that, in general, diversified

firms are more likely to make higher investments in

information technology, but the positive relationship may

also depend on the extent to which firms diversify. They

show that firms with diversified structures that increase the

complexities of coordination and control are less likely to

make IT investments ceteris paribus because of the

increased use of financial controls instead of strategic

controls by these firms. Their results suggest that IT can

serve as an effective coordination and control mechanism

for moderate levels of diversification whereas non-IT

mechanisms for coordination and control becomes more

suitable in a context of higher levels of diversification.

Their results provide new insights into the relationship

between IT investment levels and firm diversification.

The third paper, authored by Kunsoo Han of McGill

University, Robert Kauffman of Arizona State University

and Barrie Nault of University of Calgary, is titled ‘‘Rel-

ative importance, specific investment and ownership in

inter-organizational systems.’’ The implementation and

maintenance of inter-organizational systems (IOS) require

investments by all participating firms within a firm’s value

network. However, the benefits of an investment in IOS are

subjects to additional uncertainties and risks since they

depend not only on a firm’s own decisions, but also on

those of its business partners. By drawing upon prior lit-

erature in institutional economics, the authors examine the

critical role of IOS ownership as a means to induce value-

maximizing non-contractible investments. They model the

impact of two factors derived from the theory of incom-

plete contracts and transaction cost economics: relative

importance and specificity of IT investments, and apply

their model to a vendor-managed inventory system (VMI)

in a supply chain setting. Their analytical model shows that

when specificity of investments is high, it is a more critical

determinant of optimal ownership structure than the rela-

tive importance of investments. As technologies used in

IOS become increasingly redeployable and reusable, and

less specific, the relative importance of such investments

becomes a dominant factor. The authors highlight the

implications of their findings for managerial practice using

a few real-world examples.

The fourth paper by Nan Hu of Singapore Management

University, Ling Liu of the University of Texas at Dallas,

and Jennifer Zhang of the University of Texas, Arlington,

is titled ‘‘Do online reviews affect product sales? The role

of reviewer characteristics and temporal effects.’’ Online

product reviews at consumer websites such as Ama-

zon.com play a critical role in shaping consumers’

purchasing decisions. Rather than looking at the quantity of

reviews as previous research has done, the authors consider

the possible impacts of reviewer quality, reviewer reputa-

tion, and temporal effects on product sales rank. Their

analysis shows that consumers are more sensitive to what

prolific reviewers say; reviewers who contribute less fre-

quently are less likely to sway purchasing decisions.

Furthermore, the impact of item reviews diminishes over

time. This result confirms the importance of online reviews

for recently launched products suggesting, perhaps, that

vendors may want to incentivize or otherwise motivate

individuals to summit item reviews early on.

The fifth paper, submitted by Robert Kauffman of Ari-

zona State University and Bin Wang from the University of

Texas, Pan American, is titled ‘‘Tuning into the digital

channel: Evaluating business model fit for Internet firm

survival.’’ Although many online firms fell victim to the

Internet bust in the early part of this decade, some firms not

only survived, but also prospered. This paper uses survival

analysis to examine the enduring characteristics of those

firms that survived. Working from a panel data set of 130

companies, the authors determine that firms engaging in

customer–provider activities, that act as transaction bro-

kers, and that rely on advertising as their primary source of

revenue have a lower likelihood of bankruptcy or failure.

The enduring lesson of this paper points to the importance

of providing a value proposition to online customers. If

value is somehow diminished, bankruptcy and failure are

likely to follow.

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