Resource Co-specialization, Firm Growth, and Organizational Performance: An Empirical Analysis of Organizational Restructuring and IT Implementations

This paper examines the effects of co-specialized information technology (IT) on the growth and performance of IT-investing firms as a driver of competitive advantages. By adopting resource-based and dynamic-capability perspectives on firm-specific IT systems, we first identify the mechanisms of resource co-specialization strategy in the process of IT implementation as organizational restructuring and adaptive customization of IT applications into the context of adopting firms. Then, we examine impacts of the resulting co-specialized IT system on organizational performance. Testable hypotheses are developed to investigate how the co-specialization mechanisms of organizational restructuring and IT customization influence firm growth--in terms of the number of employees, value-added, and revenue. We also examine how co-specialization mechanisms of organizational restructuring and IT customization influence project outcomes--in terms of project referenceability and license extension measures. These empirical tests control for other contextual factors and the endogeneity of decision variables. Using a unique panel data on 334 firms adopting Advanced Planning and Scheduling (APS)applications, we find strong empirical support for the co-specialization hypothesis that strategic choices of using IT co-specialization mechanisms are positively associated with firm growth and with superior project outcomes in the sample firms.