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

Forthcoming, Journal of the Association for Information Systems

50 Pages Posted: 17 Jun 2020

See all articles by Pouya Rahmati

Pouya Rahmati

University of Georgia

Ali R. Tafti

University of Illinois at Chicago

Sunil Mithas

University of South Florida

Vishal Sachdev

affiliation not provided to SSRN

Date Written: May 11, 2020

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 can 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 their 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 a data panel on 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.

Keywords: Information technology firms, Software, Alliances, Innovation, Software, Network, Returns on Research & Development, R&D investments

Suggested Citation

Rahmati, Pouya and Tafti, Ali R. and Mithas, Sunil and Sachdev, Vishal, How Does the Positioning of Information Technology Firms in Strategic Alliances Influence Returns to R&D Investments? (May 11, 2020). Forthcoming, Journal of the Association for Information Systems, Available at SSRN: https://ssrn.com/abstract=3608827

Pouya Rahmati

University of Georgia ( email )

Athens, GA 30602-6254
United States

Ali R. Tafti (Contact Author)

University of Illinois at Chicago ( email )

601 S Morgan St, 2403 University Hall, MC 294
Chicago, IL 60607
United States

Sunil Mithas

University of South Florida ( email )

Tampa, FL 33620
United States

Vishal Sachdev

affiliation not provided to SSRN

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