Production Chain Organization in the Digital Age: Information Technology Use and Vertical Integration in U.S. Manufacturing

Published Online:https://doi.org/10.1287/mnsc.2019.01586

References

  • Adelman MA (1949) The large firm and its suppliers. Rev. Econom. Statist. 31(2):113–118.CrossrefGoogle Scholar
  • Afuah A (2003) Redefining firm boundaries in the face of the internet: Are firms really shrinking? Acad. Management Rev. 28(1):34–53.CrossrefGoogle Scholar
  • Anderson E Jr, Jiang X, Parker GG, Tan B (2019) Systems integration and the dynamics of partial outsourcing. Production Oper. Management 28(2):319–340.CrossrefGoogle Scholar
  • Argyres NS, Bigelow L (2010) Innovation, modularity, and vertical deintegration: Evidence from the early US auto industry. Organ. Sci. 21(4):842–853.LinkGoogle Scholar
  • Argyres NS, Liebeskind JP (2002) Governance inseparability and the evolution of US biotechnology industry. J. Econom. Behav. Organ. 47(2):197–219.CrossrefGoogle Scholar
  • Argyres NS, Zenger TR (2012) Capabilities, transaction costs, and firm boundaries. Organ. Sci. 23(6):1643–1657.LinkGoogle Scholar
  • Atalay E, Hortacsu A, Syverson C (2014) Vertical integration and input flows. Amer. Econom. Rev. 104(4):1120–1148.CrossrefGoogle Scholar
  • Athey S, Stern S (2002) The impact of information technology on emergency healthcare reforms. RAND J. Econom. 33(3):399–432.CrossrefGoogle Scholar
  • Atrostic BK, Nguyen SV (2005) IT and productivity in U.S. manufacturing: Do computer networks matter? Econom. Inquiry 43(3):493–506.CrossrefGoogle Scholar
  • Bai J, Jin W, McElheran K, Williams R (2018) The effects of technology adoption on firms, supply chains, and rivals. Preprint, submitted October 15, https://dx.doi.org/10.2139/ssrn.3259180.Google Scholar
  • Baker GP, Hubbard TN (2003) Make vs. buy in trucking: Asset ownership, job design, and information. Amer. Econom. Rev. 93(3):551–572.CrossrefGoogle Scholar
  • Baker GP, Hubbard TN (2004) Contractibility and asset ownership: On-board computers and governance in U.S. trucking. Quart. J. Econom. 119(4):1443–1479.CrossrefGoogle Scholar
  • Bakos JY, Brynjolfsson E (1993) Information technology, incentives, and the optimal number of suppliers. J. Management Inform. Systems 10(2):37–53.CrossrefGoogle Scholar
  • Bakos JY, Nault BR (1997) Ownership and investment in electronic networks. Inform. Systems Res. 8(4):321–341.LinkGoogle Scholar
  • Benitez J, Ray G, Henseler J (2018) Impact of information technology infrastructure flexibility on mergers and acquisitions. MIS Quart. 41(1):25–43.CrossrefGoogle Scholar
  • Bharadwaj A, El Sawy OA, Pavlou PA, Venkatraman NV (2013) Digital business strategy: Toward a next generation of insights. MIS Quart. 37(2):471–482.CrossrefGoogle Scholar
  • Bloom N, Garicano L, Sadun R, Van Reenen J (2014) The distinct effects of information technologies and communication technologies on firm organization. Management Sci. 60(12):2859–2885.LinkGoogle Scholar
  • Bradach JL, Eccles RG (1989) Price, authority, and trust: From ideal types to plural forms. Annual Rev. Sociol. 15:97–118.CrossrefGoogle Scholar
  • Bresnahan TF, Brynjolfsson E, Hitt LM (2002) Information technology, workplace organization, and the demand for skilled labor: Firm-level evidence. Quart. J. Econom. 117(1):339–376.CrossrefGoogle Scholar
  • Brews P, Tucci C (2004) Exploring the structural effects of internetworking. Strategic Management J. 25(5):429–451.CrossrefGoogle Scholar
  • Brynjolfsson E, Hitt LM (2003) Computing productivity: Firm-level evidence. Rev. Econom. Statist. 85(4):793–808.CrossrefGoogle Scholar
  • Brynjolfsson E, McAfee A (2014) The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies (WW Norton & Company, New York).Google Scholar
  • Brynjolfsson E, McElheran K (2016) The rapid adoption of data-driven decision-making. Amer. Econom. Rev. Papers Proc. 106(5):133–139.Google Scholar
  • Brynjolfsson E, Milgrom P (2013) Complementarity in organizations. Gibbons R, Roberts J, eds. Handbook of Organizational Economics (Princeton University Press, Princeton, NJ), 11–55.CrossrefGoogle Scholar
  • Brynjolfsson E, Jin W, McElheran K (2021) The power of prediction: Predictive analytics, workplace complements, and business performance. Bus. Econom. 56(4):217–239.CrossrefGoogle Scholar
  • Brynjolfsson E, Malone T, Gurbaxani V, Kambil A (1994) Does information technology lead to smaller firms? Management Sci. 40(12):1645–1662.LinkGoogle Scholar
  • Cao C, Ray G, Subramani M, Gupta A (2022) enterprise systems and the likelihood of horizontal, vertical, and conglomerate mergers and acquisitions. MIS Quart. 46(2):1227–1242.CrossrefGoogle Scholar
  • Chondrakis G, Melero E, Sako M (2022) The effect of coordination requirements on sourcing decisions: Evidence from patent prosecution services. Strategic Management J. 43(6):1141–1169.CrossrefGoogle Scholar
  • Clemons EK, Row MC (1992) Information technology and industrial cooperation: The changing economics of coordination and ownership. J. Management Inform. Systems 9(2):9–28.CrossrefGoogle Scholar
  • Clemons EK, Reddi SP, Row MC (1993) The impact of information technology on the organization of economic activity: The “move to the middle” hypothesis. J. Management Inform. Systems 10(2):9–35.CrossrefGoogle Scholar
  • Coase RH (1937) The nature of the firm. Economica 4(16):386–405.CrossrefGoogle Scholar
  • Cooper R, Haltiwanger J, Power L (1999) Machine replacement and the business cycle: Lumps and bumps. Amer. Econom. Rev. 89(4):921–946.CrossrefGoogle Scholar
  • David PA (1990) The dynamo and the computer: An historical perspective on the modern productivity paradox. Amer. Econom. Rev. 80(2):355–361.Google Scholar
  • de Fontenay CC, Gans J (2005) Vertical integration in the presence of upstream competition. RAND J. Econom. 36(3):544–572.Google Scholar
  • Dewan S, Ren F (2011) Information technology and firm boundaries: Impact on firm risk and return performance. Inform. Systems Res. 22(2):369–388.LinkGoogle Scholar
  • Dewan S, Michael SC, Min C (1998) Firm characteristics and investments in information technology: Scale and scope effects. Inform. Systems Res. 9(3):219–232.LinkGoogle Scholar
  • Dutta S, Bergen M, Heide JB, John G (1995) Understanding dual distribution: The case of reps and house accounts. J. Law Econom. Organ. 11(1):189–204.Google Scholar
  • Fichman RG, Melville NP (2014) How posture-profile misalignment in it innovation diminishes returns: Conceptual development and empirical demonstration. J. Management Inform. Systems 31(1):203–240.CrossrefGoogle Scholar
  • Forbes S, Lederman M (2009) Adaptation and vertical integration in the airline industry. Amer. Econom. Rev. 99(5):1831–1849.CrossrefGoogle Scholar
  • Forman C, Goldfarb A, Greenstein S (2005) How did location affect adoption of the commercial internet? Global village vs. urban leadership. J. Urban Econom. 58(3):389–420.CrossrefGoogle Scholar
  • Forman C, Goldfarb A, Greenstein S (2008) Understanding inputs into innovation: Do cities substitute for internal firm resources? J. Econom. Management Strategy 17(2):295–316.CrossrefGoogle Scholar
  • Gong F, Nault BR, Rahman MS (2016) Research note—An internet-enabled move to the market in logistics. Inform. Systems Res. 27(2):440–452.LinkGoogle Scholar
  • Gorodnichenko Y, Shapiro MD (2011) Using the survey of plant capacity to measure capital utilization. U.S. Census Bureau Center for Economic Studies Paper No. CES-WP-11-19, U.S. Census Bureau, Washington, DC.Google Scholar
  • Gurbaxani V, Whang S (1991) The impact of information systems on organizations and markets. Comm. ACM 34(1):59–73.CrossrefGoogle Scholar
  • Harrigan KR (1985) Vertical integration and corporate strategy. Acad. Management J. 28(2):397–425.CrossrefGoogle Scholar
  • Heide JB (2003) Plural governance in industrial purchasing. J. Marketing 67(4):18–29.CrossrefGoogle Scholar
  • Hitt LM (1999) Information technology and firm boundaries: Evidence from panel data. Inform. Systems Res. 10(2):134–149.LinkGoogle Scholar
  • Hitt LM, Wu DJ, Zhou X (2002) Investment in enterprise resource planning: Business impact and productivity measures. J. Management Inform. Systems 19(1):71–98.CrossrefGoogle Scholar
  • Hubbard TN (2000) The demand for monitoring technologies: The case of trucking. Quart. J. Econom. 115(2):533–560.CrossrefGoogle Scholar
  • Jacobides MG, Billinger S (2006) Designing the boundaries of the firm: From “make, buy, or ally” to the dynamic benefits of vertical architecture. Organ. Sci. 17(2):249–261.LinkGoogle Scholar
  • Jacobides MG, Hitt LM (2005) Losing sight of the forest for the trees? Productive capabilities and gains from trade as drivers of vertical scope. Strategic Management J. 26(13):1209–1227.CrossrefGoogle Scholar
  • Jovanovic B, Rousseau PL (2005) General purpose technologies. Aghion P, Durlauf SN, eds. Handbook of Economic Growth (Elsevier, Amsterdam), 1181–1224.Google Scholar
  • Kapoor R (2013) Persistence of integration in the face of specialization: How firms navigated the winds of disintegration and shaped the architecture of the semiconductor industry. Organ. Sci. 24(4):1195–1213.LinkGoogle Scholar
  • King A, Goldfarb B, Simcoe T (2021) Learning from testimony on quantitative research in management. Acad. Management Rev. 46(3):465–488.CrossrefGoogle Scholar
  • Kretschmer T, Khashabi P (2020) Digital transformation and organization design: An integrated approach. Calif. Management Rev. 62(4):86–104.CrossrefGoogle Scholar
  • Lafontaine F, Shaw K (2005) Targeting managerial control: Evidence from franchising. RAND J. Econom. 36(1):131–150.Google Scholar
  • Lafontaine F, Slade M (2007) Vertical integration and firm boundaries: The evidence. J. Econom. Literature 45(3):629–685.CrossrefGoogle Scholar
  • Lee HL, Whang S (2000) Information sharing in a supply chain. Internat. J. Manufacturing Tech. Management 1(1):79–93.CrossrefGoogle Scholar
  • Lee HL, Padmanabhan V, Whang S (1997) Information distortion in the supply chain: The bullwhip effect. Management Sci. 43(4):546–558.LinkGoogle Scholar
  • Leiblein MJ, Miller DJ (2003) An empirical examination of transaction‐and firm‐level influences on the vertical boundaries of the firm. Strategic Management J. 24(9):839–859.CrossrefGoogle Scholar
  • Liu Y, Ravichandran T (2015) Alliance experience, IT-enabled knowledge integration, and ex ante value gains. Organ. Sci. 26(2):511–530.LinkGoogle Scholar
  • Luo J, Baldwin CY, Whitney DE, Magee CL (2012) The architecture of transaction networks: A comparative analysis of hierarchy in two sectors. Indust. Corporate Change 21(6):1307–1335.CrossrefGoogle Scholar
  • Malone T, Yates J, Benjamin RI (1987) Electronic markets and electronic hierarchies. Comm. ACM 30(6):484–497.CrossrefGoogle Scholar
  • Mayer KJ, Nickerson JA (2005) Antecedents and performance implications of contracting for knowledge workers: Evidence from information technology services. Organ. Sci. 16(3):225–242.LinkGoogle Scholar
  • McElheran K (2014) Delegation in multi‐establishment firms: Evidence from it purchasing. J. Econom. Management Strategy 23(2):225–258.CrossrefGoogle Scholar
  • McElheran K (2018) Economic measurement of AI. 2nd NBER Econom. Artificial Intelligence Conf. (NBER, Cambridge, MA), 1–29.Google Scholar
  • Ménard C (2012) Hybrid modes of organization. Alliances, joint ventures, networks, and other “strange” animals. Gibbons R, Roberts J, eds. Handbook of Organizational Economics (Princeton University Press, Princeton, NJ), 1066–1108.Google Scholar
  • Ménard C (2013) Plural forms of organization: Where do we stand? Management Decision Econom. 34(3–5):124–139.CrossrefGoogle Scholar
  • Milgrom P, Roberts J (1988) Communication and inventory as substitutes in organizing production. Scandinavian J. Econom. 90(3):275–289.CrossrefGoogle Scholar
  • Mithas S, Tafti A, Mitchell W (2013) How a firm’s competitive environment and digital strategic posture influence digital business strategy. MIS Quart. 37(2):511–536.CrossrefGoogle Scholar
  • Monteverde K, Teece DJ (1982) Supplier switching costs and vertical integration in the automobile industry. Bell J. Econom. 13(1):206–213.CrossrefGoogle Scholar
  • Nguyen S, Atrostic BK (2006) How businesses use information technology: Insights for measuring technology and productivity. U.S. Census Bureau Center for Economic Studies Paper No. 06-15, U.S. Census Bureau, Washington, DC.Google Scholar
  • Nickerson JA, Silverman BS (2003) Why firms want to organize efficiently and what keeps them from doing so: Inappropriate governance, performance, and adaptation in a deregulated industry. Admin. Sci. Quart. 48(3):433–465.CrossrefGoogle Scholar
  • Novak S, Stern S (2009) Complementarity among vertical integration decisions: Evidence from automobile product development. Management Sci. 55(2):311–332.LinkGoogle Scholar
  • Parker GG, Anderson EG Jr (2002) From buyer to integrator: The transformation of the supply‐chain manager in the vertically disintegrating firm. Production Oper. Management 11(1):75–91.CrossrefGoogle Scholar
  • Parmigiani A (2007) Why do firms both make and buy? An investigation of concurrent sourcing. Strategic Management J. 28(3):285–311.CrossrefGoogle Scholar
  • Prieger JE (2003) The supply side of the digital divide: Is there equal availability in the broadband internet access market? Econom. Inquiry 41(2):346–363.CrossrefGoogle Scholar
  • Puranam P, Gulati R, Bhattacharya S (2013) How much to make and how much to buy? An analysis of optimal plural sourcing strategies. Strategic Management J. 34(10):1145–1161.CrossrefGoogle Scholar
  • Rai A, Arikan I, Pye J, Tiwana A (2015) Fit and misfit of plural sourcing Strategies and IT-enabled process integration capabilities. MIS Quart. 39(4):865–886.CrossrefGoogle Scholar
  • Ravichandran T, Giura SI (2019) Knowledge transfers in alliances: Exploring the facilitating role of information technology. Inform. Systems Res. 30(3):726–744.LinkGoogle Scholar
  • Ray G, Wu D, Konana P (2009) Competitive environment and the relationship between IT and vertical integration. Inform. Systems Res. 20(4):585–603.LinkGoogle Scholar
  • Ray G, Xue L, Barney JB (2013) Impact of information technology capital on firm scope and performance: The role of asset characteristics. Acad. Management J. 56(4):1125–1147.CrossrefGoogle Scholar
  • Rosenberg N, Trajtenberg M (2004) A general-purpose technology at work: The Corliss steam engine in the late-nineteenth-century United States. J. Econom. Hist. 64(1):61–99.CrossrefGoogle Scholar
  • Rothaermel FT, Hitt MA, Jobe LA (2006) Balancing vertical integration and strategic outsourcing: Effects on product portfolio, product success, and firm performance. Strategic Management J. 27(11):1033–1056.CrossrefGoogle Scholar
  • Santos FM, Eisenhardt KM (2005) Organizational boundaries and theories of organization. Organ. Sci. 16(5):491–508.LinkGoogle Scholar
  • Simchi-Levi D, Kaminsky P, Simchi-Levi E (1999) Designing and Managing the Supply Chain: Concepts, Strategies, and Cases (McGraw-Hill, New York).Google Scholar
  • Sørensen SB, G Hoetker, MJ Leiblein, T Mellewigt (2022) Crossing the streams of plural governance research: Simultaneously considering franchising, dual distribution, and concurrent sourcing. J. Management 498(8):2831–2862.Google Scholar
  • Stenbacka R, Tombak M (2012) Make and buy: Balancing bargaining power. J. Econom. Behav. Organ. 81(2):391–402.CrossrefGoogle Scholar
  • Stock JH, Yogo M (2005) Testing for weak instruments in linear IV regression. Andrews DWK, ed. Identification and Inference for Econometric Models (Cambridge University Press, Cambridge, UK), 80–108.CrossrefGoogle Scholar
  • Syverson C (2011) What determines productivity? J. Econom. Literature 49(2):326–365.CrossrefGoogle Scholar
  • Tafti A, Mithas S, Krishnan MS (2013) The effect of information technology–enabled flexibility on formation and market value of alliances. Management Sci. 59(1):207–225.LinkGoogle Scholar
  • Tambe P, Hitt LM (2012) The productivity of information technology investments: New evidence from IT labor data. Inform. Systems Res. 23(3):599–617.LinkGoogle Scholar
  • Tambe P, Hitt LM, Brynjolfsson E (2012) The extroverted firm: How external information practices affect innovation and productivity. Management Sci. 58(5):843–859.LinkGoogle Scholar
  • Thompson JD (1967) Organizations in Action: Social Science Bases of Administration (Routledge, New York).Google Scholar
  • Veugelers R, Cassiman B (1999) Make and buy in innovation strategies: Evidence from Belgian manufacturing firms. Res. Policy 28(1):63–80.CrossrefGoogle Scholar
  • Vial G (2019) Understanding digital transformation: A review and a research agenda. J. Strategic Inform. Systems 28(2):118–144.CrossrefGoogle Scholar
  • Villalonga B (2004) Diversification discount or premium? New evidence from the business information tracking series. J. Finance 59(2):479–506.CrossrefGoogle Scholar
  • Westerman G, Bonnet D, McAfee A (2014) Leading Digital: Turning Technology into Business Transformation (Harvard Business Press, Cambridge, MA).Google Scholar
  • Williamson OE (1985) The Economic Institutions of Capitalism (Free Press, New York).Google Scholar
  • Williamson OE (1991) Comparative economic organization: The analysis of discrete structural alternatives. Admin. Sci. Quart. 36(2):269–296.CrossrefGoogle Scholar
  • Wu L, Bowen L, Hitt LM (2019) Data analytics supports decentralized innovation. Management Sci. 65(10):4863–4877.LinkGoogle Scholar
INFORMS site uses cookies to store information on your computer. Some are essential to make our site work; Others help us improve the user experience. By using this site, you consent to the placement of these cookies. Please read our Privacy Statement to learn more.