Why IT Matters: An Empirical Study of E-Business Usage, Innovation, and Firm Performance

The article argues that IT continues to have strategic relevance for companies because it en-ables innovation. A conceptual link between the adoption of IT and innovation is established. This conceptual link allows a market-based, economic explanation for variations in IT payoffs among firms: The successful adoption of new IT leads to innovation. Depending on the be-havior of customers and competitors, a successful innovation can enable companies to gain competitive advantages. The economic theory of innovation suggests conditions that are nec-essary for firms to benefit from innovative activities. The relevance of IT as an important enabler of innovation is demonstrated using a very large sample of enterprises from different industries and countries in the European Union surveyed in late 2003. It is shown that a substantial share of firms use IT to introduce new processes into their business, or to offer new products or services to their customers. To study the rela-tionship between firm performance and innovation, I estimate an error component model that controls for unobserved market-specific effects and various firm-specific characteristics. The regression results indicate that innovative firms are generally more likely to exhibit increasing turnover and employment. In addition, firms that conduct product or service innovations are also more likely to be profitable. Furthermore, enterprises using IT to innovate perform at least as well as those innovating without IT. Yet, no significant relationship between process innovation and profitability is found, suggesting that firms might have problems to appropri-ate excess profits from process innovations, independent from whether they are enabled by IT or not. Possible reasons for this include time-lags between process innovations and profit gains, problems to effectively protect process innovations from imitation by competitors, or a lack of complementary resources. The results suggest that the returns to IT critically depend on whether and how IT investments are transferred into innovative activities. In addition, they suggest that IT will maintain its strategic importance as long as the IT industry remains inno-vative in developing new IT hardware and useful new business applications for it.Firm performance; Innovation; Information technology; Fixed effects logit

Endogenous Acceleration of Technological Change

Our study shows that the technological development of a firm can be subject to an endogenous acceleration mechanism. The more advanced a firm is in using a particular set of technologies, the more likely will it adopt additional, related technologies. This acceleration mechanism implies that marginal differences in early adoption decisions lead to substantial differences in technology endowment later. This hypothesis is tested in a dataset that records the adoption times of various e-business technologies in a sample of 7,302 firms from 10 different industry sectors and 25 European countries. Estimation is carried out with a semi-parametric hazard rate model that controls for unobserved heterogeneity. The results show that the probability to adopt strictly increases with the number of previously adopted e-business technologies. Evidence for a growing digital divide among the companies in the sample is demonstrated for the period from 1994-2002. The endogenous acceleration mechanism is a possible source of early mover advantages, if technological uncertainty and technological improvements over time are not very large and if the price of the new technologies remains roughly constant.Technology adoption, Technological competition, Complementarity, Hazard rate models, IT

Not for Lack of Trying: American Entrepreneurship in Black and White

Using a sample obtained from a survey conducted in the United States during summer 2002, we study the variables related to observed differences in the rate of entrepreneurial involvement between black and white Americans. We find strong evidence that differences in subjective and often biased perceptions are highly associated with entrepreneurial propensity across these two racial groups. In addition, we find that black Americans tend to exhibit more optimistic perceptions of their business environment than other racial groups and are more likely than others to attempt starting a business. In fact, our results show that blacks are almost twice as likely as whites to try starting a business. Thus, our results suggest that the under representation of black Americans among established entrepreneurs is not due to lack of trying but may instead be due to stronger barriers to entry and higher failure rates.Entrepreneurship, Black Entrepreneurship, Minority Entrepreneurship, Nascent Entrepreneurship.

Adoption of e-business: patterns and consequences of network externalities

The paper analyzes the adoption of various e-business technologies. Strong empirical evidence is found for the existence of increasing returns to adoption due to indirect network externalities between related technologies. If a company is close to the technological frontier, its probability of adoption increases. The empirical analysis is based on more than 5,000 observations from a cross-sectional European enterprise survey conducted in June 2002. A classification and regression tree (CART) is used to illustrate technological complementarities and their effect for the adoption probability of a firm. --Technology Adoption,Path Dependence,Classification Trees

Analyzing E-Learning Adoption via Recursive Partitioning

The paper analyzes factors that influence the adoption of e-learning and gives an example of how to forecast technology adoption based on a post-hoc predictive segmentation using a classification and regression tree (CART). We find strong evidence for the existence of technological interdependencies and organizational learning effects. Furthermore, we find different paths to elearning adoption. The results of the analysis suggest a growing "digital divide" among firms. We use cross-sectional data from a European survey about e-business in June 2002, covering almost 6,000 enterprises in 15 industry sectors and 4 countries. Comparing the predictive quality of CART, we find that CART outperforms a traditional logistic regression. The results are more parsimonious, i. e. CARTs use less explanatory variables, better interpretable since different paths of adoption are detected, and from a statistical standpoint, because interactions between the covariates are taken into account.Technology Adoption, Path Dependence, Interaction between Different Technologies, Regression Trees, Predictive Segmentation, Logistic Regression, E-Learning, E-Business

E-Business in europäischen Unternehmen: wachsende Kluft zwischen Pionieren und Nachzüglern

Die Investitionsentscheidungen von Unternehmen für E-Business-Technologien werden von verschiedenen Faktoren beeinflusst. Als wichtigster Faktor für die Investition in eine zusätzliche E-Business-Technologie stellt sich die Zahl der im Unternehmen bereits genutzten E-Business-Technologien heraus. Die Wahrscheinlichkeit einer Investition ist umso größer, je fortgeschrittener die E-Business-Technologie-Ausstattung eines Unternehmens bereits ist. Dies deutet auf eine wachsende Kluft in der Technologie-Ausstattung zwischen E-Business-Pionieren und -Nachzüglern hin. Weitere Forschungsergebnisse zeigen, dass Investitionen in Informationstechnologien wie E-Business in Verbindung mit Veränderungen von Arbeitsabläufen zu einer deutlich steigenden Produktivität führen. Dies könnte daher ceteris paribus wachsende Wettbewerbsvorteile der E-Business-Pioniere gegenüber konkurrierenden Nachzüglern zur Folge haben.

"I Think I Can, I Think I Can": Overconfidence and Entrepreneurial Behavior

Many firms fail shortly after inception. Yet individuals continue starting businesses. Prewar economists such as Keynes invoked animal spirits and stressed psychological factors in their explanations of economic behavior. Using a large sample obtained from surveys conducted in 18 countries, we study what variables have a significant impact on an individual's decision to start a business. We find strong evidence that subjective, and often biased, perceptions have a crucial impact on new business creation across all countries in our sample. Our findings are consistent with the idea that individuals rely significantly on their perceptions rather than on objective probabilities, evaluate their businesses prospects by taking an overconfident "inside view" of their situation, and, as a result, overestimate their likelihood of success.Entrepreneurship; Self-employment; Perceptions; Perceptual variables; Overconfidence

Entrepreneurial Overconfidence: Evidence from a C.A.R.T. Approach

We use a sample of 18 countries to study what variables have a significant impact on an individual's decision to start a new business and classification and regression trees for an accurate interpretation of the data. Our results support existing literature suggesting the existence of strong country effects. In addition, we find strong evidence that perceptual variables, such as one's belief about her own skills and ability and about the risk involved in the venture, have a crucial impact on new business creation across all countries in our sample. Our findings are consistent with the idea that entrepreneurs evaluate their businesses by taking an "inside view" of their situation, overestimate their likelihood of success, and, as a result, rely significantly on perceptions rather than on objective expectations of success.CARTs; Entrepreneurship; Overconfidence; Self-employment

Warum Amerikaner mehr Unternehmen gründen als Deutsche: der Einfluss von subjektiven Wahrnehmungen auf Gründungsentscheidungen

Im vorliegenden Bericht wird die Frage untersucht, warum die Bevölkerung in einigen Ländern hinsichtlich Unternehmensgründungen aktiver ist als in anderen. So gründen z. B. in den USA jedes Jahr relativ mehr Menschen ein Unternehmen als in Deutschland. Analysiert wird hier der Einfluss von subjektiven Wahrnehmungen und Einstellungen auf die Entscheidung von Personen, ein Unternehmen zu gründen. Die Ergebnisse zeigen, dass es bezüglich der Ausprägung solcher Faktoren erhebliche Unterschiede zwischen den Ländern gibt. Sie können einen wichtigen Beitrag leisten, die Gründungsaktivitäten der Länder zu erklären. Eine Modellschätzung ergibt Folgendes: Wären die Deutschen genauso optimistisch, selbstbewusst und risikofreudig wie die Amerikaner, würden in Deutschland anteilig sogar mehr Menschen ein Unternehmen gründen als in den USA.

Technological change

Die vorliegende Dissertation beschäftigt sich hauptsächlich mit zwei Fragen: Erstens, welche Faktoren beein-flussen den Prozess, durch den sich neue Technologien unter Firmen verbreiten? Zweitens, welche Konsequen-zen ergeben sich aus der Verbreitung neuer Technologien? Beide Fragen beschäftigen sich mit der Dynamik des technologischen Wandels. Die Analyse wird am konkreten Beispiel von e-Business Technologien durchgeführt. Dabei werden insbesondere die Konsequenzen von interdependenten Technologien untersucht. Es wird ge-zeigt, dass es zu steigenden Erträgen der Adoption kommen kann, wenn verwandte Technologien sich nicht in ih-ren Funktionalitäten substituieren. Dies kann zu einer endogenen Beschleunigung der technologischen Entwick-lung führen. Dies bedeutet, dass die Wahrscheinlichkeit der Adoption einer Technologie mit der Anzahl der zu-vor adoptierten, verwandten Technologien ansteigt. Diese Theorie wird empirisch getestet und in vier verschie-denen Untersuchungen mit zwei verschiedenen, großen Datensätzen bestätigt. Die Existenz einer wachsenden di-gitalen Kluft in der e-Business Technologie-Ausstattung der Unternehmen wird für den Zeitraum von 1994-2002 nachgewiesen. Außerdem wird argumentiert, dass die Adoption neuer Technologien in Firmen strategische Bedeutung hat da sich daraus Möglichkeiten zur Durchführung von Innovationen ergeben. Diese können sich entweder durch redu-zierte Produktionkosten für bestehende Produkte, neue Produkte und Dienstleistungen, oder neue Distributions-kanäle manifestieren. Empirische Evidenz zeigt, dass e-Business Technologien derzeit wichtige Enabler von In-novationen sind und dass innovative Firmen mit höherer Wahrscheinlichkeit wachsen. Außerdem wird gezeigt, dass durch e-Business Technologien induzierte Innovationen gegenüber anderen Innovationsarten nicht inferior sind in Bezug auf deren gleichzeitiges Auftreten mit finanziellen Leistungsindikatoren. Die Arbeit diskutiert die Implikationen dieser Ergebnisse aus volks- und betriebswirtschaftlicher Perspektive.This dissertation primarily deals with two questions: First, what determines the process by which new tech-nologies spread among enterprises over time? Second, what are the consequences of the spread of new technolo-gies? Both questions concern the dynamics of technological change. They are analyzed considering the diffusion and implications of e-business technologies as a concrete example. Particular attention is given to technological interdependencies. It is shown that increasing returns to adoption can arise if related technologies do not substitute each other in their functionalities. This can lead to an endoge-nous acceleration of technological development. Hence, the probability to adopt any technology is an increasing function of previously adopted, related technologies. The theory is empirically tested and supported in four inde-pendent inquiries, using two different exceptionally large datasets and different econometric methods. The exis-tence of a growing digital divide among companies is demonstrated for the period between 1994 and 2002. In addition, it is argued that the adoption of new e-business technologies by firms has strategic relevance be-cause this creates opportunities to conduct innovation, either to reduce production costs for a given output, to create a new product or service, or to deliver products to customers in a way that is new to the enterprise. Empiri-cal evidence is presented showing that e-business technologies are currently an important enabler of innovations. It is found that innovative firms are more likely to grow. Also, e-business related innovations are not found to be inferior to traditional kinds of innovations in terms of simultaneous occurrence with superior financial perform-ance of enterprises. Implications of these findings are discussed both for economists and management researchers