Abstract

Information Technology (IT) can support or even cause changes in the structure of industries and the relationships between firms. Yet, at present, we lack the vocabulary and theory to explain or predict these changes. Drawing on recent work in the resource-based theory of the firm, we propose that shifts in resource values are central to economic restructuring. We show how IT can operate to shift resource values through the basic economic drivers of network externalities and economies of scale, scope, and specialization. We use this theory to investigate the situations that will lead to each of the basic structural responses: changes in market consolidation, in diversification, and in vertical integration. We also can make some specific statements about what forms can be employed in the structural responses: ownership, outsourcing, or cooperation.

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