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

Kristina Steffenson McElheran ()
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Kristina Steffenson McElheran: Harvard Business School, Technology and Operations Management Unit

No 10-104, Harvard Business School Working Papers from Harvard Business School

Abstract: 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.

JEL-codes: D24 L21 M15 O33 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2010-05, Revised 2010-06
New Economics Papers: this item is included in nep-ict and nep-ino
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