Knowledge that Transforms

Information technology matters to business success because it directly affects the mechanisms through which they create and capture value to earn a profit: IT is thus integral to a firm’s business-level strategy. Much of the extant research on the IT/strategy relationship, however, inaccurately frames IT as only a functional-level strategy. This widespread under-appreciation of the business-level role of IT indicates a need for substantial retheorizing of its role in strategy and its complex and interdependent relationship with the mechanisms through which firms generate profit. Using a comprehensive framework of potential profit mechanisms, we argue that while IT activities remain integral to the functional-level strategies of the firm, they also play several significant roles in business strategy, with substantial performance implications. IT affects industry structure and the set of business-level strategic alternatives and value-creation opportunities that a firm may pursue. Along with complementary organizational changes, IT both enhances the firm’s current (ordinary) capabilities and enables new (dynamic) capabilities, including the flexibility to focus on rapidly changing opportunities or to abandon losing initiatives while salvaging substantial asset value. Such digitally attributable capabilities also determine how much of this value, once created, can be captured by the firm—and how much will be dissipated through competition or through the power of value chain partners, the governance of which itself depends on IT. We explore these business-level strategic roles of IT and discuss several provocative implications and future research directions in the converging information systems and strategy domains.

Information technology has arguably been one of the most important drivers of economic and social value in the last 50 years, enabling transformational change in virtually every aspect of society. Although the Information Systems community is engaged in significant research on IT, the reach of our findings may be limited. In this commentary, our objective is to focus the IS community’s attention on the striking transformations in economic and social systems spawned by IT and to encourage more research that offers useful implications for policy. We present examples of transformations occurring in four distinct sectors of the economy and propose policy-relevant questions that need to be addressed. We urge researchers to write papers based on their findings that inform policy makers, managers, and decision makers about the issues that transformational technologies raise. Finally, we suggest a new outlet to publish these essays on the implications of transformational informational technology.

Internet privacy concerns (IPC) is an area of study that is receiving increased attention due to the huge amount of personal information being gathered, stored, transmitted, and published on the Internet. While there is an emerging literature on IPC, there is limited agreement about its conceptualization in terms of its key dimensions and its factor structure. Based on the multidimensional developmental theory and a review of the prior literature, we identify alternative conceptualizations of IPC. We examine the various conceptualizations of IPC with four online surveys involving nearly 4,000 Internet users. As a baseline, study 1 compares the integrated conceptualization of IPC to two existing conceptualizations in the literature. While the results provide support for the integrated conceptualization, the second-order factor model does not outperform the correlated first-order factor model. Study 2 replicates the study on a different sample and confirms the results of study 1. We also investigate whether the prior results are affected by the different perspectives adopted in the wording of items in the original instruments. In study 3, we find that focusing on one’s concern for website behavior (rather than one’s expectation of website behavior) and adopting a consistent perspective in the wording of the items help to improve the validity of the factor structure. We then examine the hypothesized third-order conceptualizations of IPC through a number of alternative higher-order models. The empirical results confirm that, in general, the third-order conceptualizations of IPC outperform their lower-order alternatives. In addition, the conceptualization of IPC that has the best fit with the data contains a third-order general IPC factor, two second-order factors of interaction management and information management, and six first-order factors (i.e., collection, secondary usage, errors, improper access, control, and awareness). Study 4 cross-validates the results with another data set and examines IPC within the context of a nomological network. The results confirm that the third-order conceptualization of IPC has nomological validity, and it is a significant determinant of both trusting beliefs and risk beliefs. Our research helps to resolve inconsistencies in the key underlying dimensions of IPC, the factor structure of IPC, and the wording of the original items in prior instruments of IPC. Finally, we discuss the implications of this research.