IT and Sustainable Competitive Advantage Dr. T. Ravichandran Lally School of Management RPI

SlackHoldup ImitationSubstitution The Four Threats to Sustainability Added Value Appropriated Value

Responses to Imitation Building Barriers Economies of scale and scope Learning/private information Contracts and relationships Network externalities Threats of retaliation Time lags Strategic complexity Upgrading Responses to Slack Gathering information Monitoring behavior Offering performance incentives Shaping norms Bonding resources Changing governance Mobilizing for change Responses to Substitution Not responding Fighting Switching Recombining Straddling Harvesting Responses to Holdup Contracting Integrating Building bargaining power Bargaining hard Reducing asset-specificity Building relationships Developing trust Added Value Appropriated Value Responding to Threats to Sustainability

Resource Based Theory Firm resources and capabilities are the basis for sustained competitive advantage Resources must be Valuable Imperfectly imitable Not substitutable Rare and unique

Resource Based Theory Difficulties in imitating emerge from Causal ambiguity Time compression diseconomics Historical uniqueness Embeddedness Path dependencies impose significant barriers for quick imitation

Resource Based View of IT Complementarity IT interacts with other firm strategic resources to yield inimitable advantages Intangible resources Intangible aspects of IT, e.g. IS resources, capabilities, and competencies are a source of sustainable competitive advantage

Dynamic Capabilities Move from static resource bundles to capability accumulation Competitive advantage accrue from differentiated capabilities and managerial efforts to strategically deploy these capabilities in a coordinated manner

IT Enabled Competitive Advantage Firms gain competitive advantage by: Using IT to support & improve their core competencies ability to do so is dependent on: IS resources and capabilities – a distinct set of people, technology, relationships and processes within the IS department and the direction provided by senior management: Clear, well articulated, and shared IT vision

Research Findings IS Resources IT Support for Core Competencies IS Capabilities Firm Performance Strategic IT Vision