Information Technology, Network Structure, and Competitive Action

Abstract

Researchers in competitive dynamics have demonstrated that firms that carry out intense, complex, and heterogeneous competitive actions exhibit better performance. However, there is a need to understand factors that enable firms to undertake competitive actions. In this study, we focus on two antecedents of competitive behavior of firms: (1) access to network resources and (2) use of information technology (IT). We argue that while network structure provides firms with the opportunity to tap into external resources, the extent to which they are actually exploited depends on firms' IT-enabled capability. We develop a theoretical model that examines the relationships between IT-enabled capability, network structure, and competitive action. We test the model using secondary data, about 12 major automakers over 16 years from 1988 to 2003. We find that network structure rich in structural holes has a positive direct effect on firms' ability to introduce a greater number and a wider range of competitive actions. However, the effect of dense network structure is contingent on firms' IT-enabled capability. Firms benefit from dense network structure only when they develop a strong IT-enabled capability. Our results suggest that IT-enabled capability plays both a substitutive role, when firms do not have advantageous access to brokerage opportunities, and a complementary role, when firms are embedded in dense network structure, in the relationship between network structure and competitive actions.

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