The Rapid Adoption of Data-Driven Decision-Making

We provide a systematic empirical study of the diffusion and adoption patterns of data-driven decision making (DDD) in the U.S. Using data collected by the Census Bureau for a large representative sample of manufacturing plants, we find that DDD rates nearly tripled (11%-30%) between 2005 and 2010. This rapid diffusion, along with results from a companion paper, are consistent with case-based evidence that DDD tends to be productivity-enhancing. Yet certain plants are significantly more likely to adopt than others. Key correlates of adoption are size, presence of potential complements such as information technology and educated workers, and firm learning

The Effect of Market Leadership in Business Process Innovation: The Case(s) of E-Business Adoption

This paper empirically investigates how market leadership influences firm propensity to adopt new business process innovations. Using a unique data set spanning roughly 35,000 plants in 86 U.S. manufacturing industries, I study the adoption of frontier e-business practices during the early diffusion of the commercial internet. Theory predicts that firms with greater market share will be more likely to adopt innovations that build on their existing strengths, while they will resist more radical technological advances. While prior work primarily focuses on product innovation, I extend the logic into the business process setting to find that leaders were far more likely to adopt the incremental innovation of internet based e-buying. However, they were commensurately less likely to adopt the more strategically sensitive and complex practice of e-selling. This pattern is remarkably robust, holding across a wide range of industries and controlling for factors such as productivity and related technological capabilities. The results are explicated by a framework I develop for understanding the drivers of this behavior and making it possible to classify business process innovations as radical or not. While greater market share promotes adoption of all types of business process innovations, this effect is outweighed by additional co-invention and coordination costs whenever a technological advance address strategically sensitive and complex business processes that must also span the firm boundary

The motivations for the adoption of management innovation by local governments and its performance effects

This article analyses the economic, political and institutional antecedents and performance effects of the adoption of shared Senior Management Teams (SMTs) – a management innovation (MI) that occurs when a team of senior managers oversees two or more public organizations. Findings from statistical analysis of 201 English local governments and interviews with organizational leaders reveal that shared SMTs are adopted to develop organisational capacity in resource‐challenged, politically risk‐averse governments, and in response to coercive and mimetic institutional pressures. Importantly, sharing SMTs may reduce rather than enhance efficiency and effectiveness due to redundancy costs and the political transaction costs associated with diverting resources away from a high‐performing partner to support their lower‐performing counterpart

Do Market Leaders Lead in Business Process Innovation? The Case(s) of E-Business Adoption

This paper investigates the relationship between market position and the adoption of IT-enabled process innovations. Prior research has focused overwhelmingly on product innovation and garnered mixed empirical support. I extend the literature into the understudied area of business process innovation, developing a framework for classifying innovations based on the complexity, interdependence, and customer impact of the underlying business process. I test the framework’s predictions in the context of ebuying and e-selling adoption. Leveraging detailed U.S. Census data, I find robust evidence that market leaders were significantly more likely to adopt the incremental innovation of e-buying but commensurately less likely to adopt the more radical practice of e-selling. The findings highlight the strategic significance of adjustment costs and co-invention capabilities in technology adoption, particularly as businesses grow more dependent on new technologies for their operational and competitive performance.

Delegation in Multi-Establishment Firms: The Organizational Structure of I.T. Purchasing Authority

A rare large-scale empirical study of delegation within firms, this paper investigates how decision rights over information technology investments are allocated within multi-establishment firms. The core results indicate that a relatively high contribution to firm sales is highly correlated with authority being delegated to the local establishment. Firm-wide operational complexity and local information advantages are also associated with local discretion for IT purchases. Certain IT investments are also positively correlated with delegation. On the other hand, significant operational interdependencies evince a positive correlation with centralization, as do productive similarities among establishments. Surprisingly, absolute size of the firm and having a large IT budget are also correlated with centralized IT decision-making. With the exception of these latter effects, the results are consistent with models of organizational design that predict delegation where there is great demand for locally adapted choices and centralization where firm-wide coordination is most important. The findings document and make sense of widespread heterogeneity in decision rights across a range of firm and industry settings – even among establishments belonging to the same parent firm. Finally, they suggest important considerations for future empirical and theoretical research into the determinants of delegation.

The power of prediction: predictive analytics, workplace complements, and business performance

Abstract Anecdotes abound suggesting that the use of predictive analytics boosts firm performance. However, large-scale representative data on this phenomenon have been lacking. Working with the Census Bureau, we surveyed over 30,000 American manufacturing establishments on their use of predictive analytics and detailed workplace characteristics. We find that productivity is significantly higher among plants that use predictive analytics—up to $918,000 higher sales compared to similar competitors. Furthermore, both instrumental variables estimates and the timing of gains suggest a causal relationship. However, we find that the productivity pay-off only occurs when predictive analytics are combined with at least one of three workplace complements: significant accumulation of IT capital, educated workers, or workplaces designed for high flow-efficiency production. Our findings support claims that predictive analytics can substantially boost performance, while also explaining why some firms see no benefits at all