How Does the Positioning of Information Technology Firms in Strategic Alliances Influence Returns to R&D Investments?

Authors

Pouya Rahmati, University of GeorgiaFollow
Ali Tafti, University of Illinois at ChicagoFollow
Sunil Mithas, University of South FloridaFollow
Vishal Sachdev, University of Illinois at Urbana ChampaignFollow

Abstract

Because software is fungible, has low marginal replication costs, and requires relatively high levels of initial investment to develop, understanding how IT-producing firms protect and leverage value from their research and development (R&D) investments is important. We examine how the positioning of IT-producing firms within their networks of strategic alliances moderates profits from R&D investments. We posit that alliances with IT-consuming firms generate relation-specific rents that, in turn, protect the value of R&D investments by making software innovations difficult for rivals to appropriate. Among IT-producing firms, we make a distinction between software consulting and services firms and software package-product firms. Our analyses of 464 IT-producing firms for the 14-year period 1996-2009 suggest that IT-producing firms’ returns on R&D investments increase with alliance ties to IT-consuming firms. We also find that alliances with IT-consuming firms have a more beneficial effect on R&D investment returns for software consulting and services firms than for software package-product firms. Our findings yield nuanced insights into how IT-producing firms should position themselves within a network of alliances with IT-consuming firms. We discuss implications for research and practice.

Recommended Citation

Rahmati, Pouya; Tafti, Ali; Mithas, Sunil; and Sachdev, Vishal (2021) "How Does the Positioning of Information Technology Firms in Strategic Alliances Influence Returns to R&D Investments?," Journal of the Association for Information Systems, 22(2), .
DOI: 10.17705/1jais.00666
Available at: https://aisel.aisnet.org/jais/vol22/iss2/6

DOI

10.17705/1jais.00666