1. Empirical examination of resource-based arguments
Recently, some of the empirical implications of these arguments have been examined (Ray, Barney, and Muhanna 2004; Ray, Muhanna, and Barney 2005). This research focused on the role of IT investments in the customer service function in North American insurance companies. These studies examined the impact of the capital required to implement IT, the quality of a ﬁrm’s current IT, the level of a ﬁrm’s IT technical skills, and one aspect of a ﬁrm’s IT managerial skills—the quality of the relationship between IT and customer service managers—on the ability of IT to give a ﬁrm a competitive advantage in the customer service function.
Previous research has shown the value of IT in improving customer ser- vice in insurance. IT enables customer service workers to gain quick access to a customer’s policies, evaluate the nature of a customer’s problems, and help address these problems—either directly or by routing a customer to the correct person in the organization. Given these implications of IT for customer service, it is not surprising that insurance companies in North America have spent billions of dollars on IT over the last several years. However, as suggested earlier in this chapter, such investments are not necessarily a source of competitive advantage for a ﬁrm in this relatively mature industry.
Surveys were used to collect information about the IT budget, the quality of a ﬁrm’s current customer service IT, the level of a ﬁrm’s technical IT skills, and the quality of the relationship between IT and customer service managers within a ﬁrm. Several measures of customer service quality were obtained, both from the survey and from a variety of government sources. The study hypothesized that the IT budget, the quality of a ﬁrm’s current customer service IT, and the level of a ﬁrm’s technical IT skills would all be unrelated to the relative level of a ﬁrm’s customer satisfaction. This was because, as suggested in this chapter, all these attributes of IT are tangible and are likely to rapidly diﬀuse among competitors, especially in mature industries like the North American insurance industry. It was also hypothesized that the quality of the relationship between IT and customer service managers—because it was likely to be socially complex and path- dependent in nature—was likely to be correlated with the relative level of a ﬁrm’s customer satisfaction. It was also hypothesized that IT budget, current technology, and IT technical skills would be positively correlated with relative customer service when the relationship between IT and cus- tomer service managers was positive. These last hypotheses were tested using interaction terms in a simple regression.
Results of this analysis were generally consistent with expectations. Cur- rent technology and technical IT skills were unrelated to relative customer satisfaction. IT budget was actually negatively correlated—reﬂecting, per- haps, the fact that when a ﬁrm’s customer satisfaction numbers drop, it must spend more on IT than its competitors. While not technically con- sistent with the hypothesized relationship between IT budget and relative customer satisfaction, this negative relationship is at least consistent with the notion that spending on IT, per se, is only likely to be a source of competitive parity.
The quality of the relationship between IT and customer service man- agers was positively correlated with relative customer satisfaction, as were the interactions between this variable and current IT and IT technical skills. That is, not only does the relationship between IT and customer service managers have a direct positive impact on customer satisfaction— measured in a variety of ways—but it also makes it possible to leverage a ﬁrm’s current technology and technical IT skills to improve customer sat- isfaction. All these results are consistent with the resource-based arguments developed in this chapter.
Of the ﬁve attributes of IT studied in this chapter, the resource-based logic suggests that only IT managerial skills are likely to be a source of sustained competitive advantage. IT management skills are often heterogeneously distributed across ﬁrms. Moreover, these skills reﬂect the unique histories of individual ﬁrms, are often part of the taken-for-granted routines in an organization, and can be based on socially complex relations within the IT function, between the IT function and other business functions in a ﬁrm, and between the IT function and a ﬁrm’s suppliers or customers.
This analysis—and subsequent empirical research—has important implications for both researchers and managers. For researchers, resource- based theory suggests that the search for IT-based sources of sustained competitive advantage must focus less on IT, per se, and more on the process of organizing and managing IT within a ﬁrm. It is the ability of IT managers to work with each other, with managers in other functional areas in a ﬁrm, and with managers in other ﬁrms that is most likely to separate those ﬁrms that are able to gain sustained competitive advantages from their IT and those that are only able to gain competitive parity from their IT. These skills, and the relationships upon which they are built, have been called managerial IT skills in this chapter. Future research will need to explore, in much more detail, the exact nature of these managerial IT skills, how they develop and evolve in a ﬁrm, and how they can be used to leverage a ﬁrm’s technical IT skills to create sustained competitive advantage.
Also, while the ability of ﬁve widely cited potential IT-based sources of sustained competitive advantage has been examined in this chapter, there may be other attributes of IT whose competitive implications have not been fully evaluated. Resource-based theory provides a framework that can be used to evaluate these competitive implications. Additional conceptual work will be required to describe these other IT attributes and their relationship to resource-based theory. Moreover, empirical tests of the arguments presented here and other resource-based arguments about IT attributes will also need to be conducted.
This analysis also has important implications for IT managers. First, simply because IT managerial skills are the only likely source of sustained competitive advantage discussed in this chapter, it does not follow that other attributes of IT are competitively unimportant. For example, while technical IT skills are not likely to be a source of sustained competitive advantage, they may be a source of temporary competitive advantage. A ﬁrm may be able to get an IT-based head start on its competition based on these technical skills (i.e. they may be heterogeneously distributed among competing ﬁrms, but not imperfectly mobile). Moreover, even when such a head start is not possible, it is still essential that a ﬁrm be as technically skilled in its IT as its competitors. After all, managerial IT skills can only be used to leverage a ﬁrm’s technical IT skills if those skills exist in a ﬁrm. Responsible IT managers will constantly compare their technical skills with their competitors and seek to meet, or exceed, their competition’s level of technical competence.
Second, this analysis suggests that, in addition to developing and main- taining a technically competent IT organization, IT managers also should seek to develop close working relationships with managers in other busi- ness functions and even with managers in other ﬁrms. Clearly, these rela- tionships are sometimes diﬃcult to build and often diﬃcult to maintain. However, it is these kinds of relationships that will enable the IT function to leverage its technical IT skills to address real business problems. Moreover, to the extent that these kinds of relationships are heterogeneously distrib- uted across a ﬁrm’s competitors, they are likely to be a source of at least a temporary competitive advantage. Indeed, since these relationships are, by deﬁnition, socially complex, they are also likely to be imperfectly mobile and thus a source of sustained competitive advantage.
Finally, this analysis suggests that using IT to gain sustained competitive advantage is not likely to be easy. Indeed, if it was relatively simple for ﬁrms to use IT in this way, then IT would not be imperfectly mobile and therefore not a source of sustained competitive advantage. The fact that it is often diﬃcult to develop IT managerial skills, relationships between the IT function and other business functions are often slow to evolve, and the technical orientation of many of those in the IT function can clash with the business orientation of others in a ﬁrm is good for those ﬁrms who have been able to develop these IT managerial skills. This implies that other ﬁrms will have a diﬃcult time imitating these skills, and therefore they can be a source of sustained competitive advantage.
Source: Barney Jay B., Clark Delwyn N. (2007), Resource-Based Theory: Creating and Sustaining Competitive Advantage, Oxford University Press; Illustrated edition.