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How Do Mobile Information Technology Networks Affect Firm Strategy and Performance? Firm-Level Evidence from Taxicab Fleets

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Author Info
Evan Rawley () (University of California, Berkeley)
Abstract

This paper examines how the adoption of mobile information technology networks impact firm strategy and performance in the U.S. taxicab industry. Using a rich, novel firm-level data set from the Economic Census, I test transaction cost economics’ prediction that adoption of mobile IT networks leads to shifts in the boundary of the firm toward increased fleet ownership of vehicles. I then exploit the homogeneity of the industry’s production function and exogenous variation in local market conditions to precisely measure the impact of adoption of mobile IT networks on productivity. I find strong evidence that firms respond to adoption of mobile IT networks by changing their organizational structure, shifting toward owning a greater fraction of vehicles in their fleets (as opposed to contracting with independent driver-owners for vehicles). I then use a precise and economically meaningful measure of firm performance to show that adoption of mobile IT networks causes firms to become more productive. The results suggest that adoption of mobile IT networks increases asset utilization by improving within-firm coordination but that firms must simultaneously shift toward a more highly vertically integrated structure to fully capture the benefits of mobile IT networks.

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Paper provided by NET Institute in its series Working Papers with number 06-28.

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Length: 33 pages
Date of creation: Oct 2006
Date of revision: Oct 2006
Handle: RePEc:net:wpaper:0628

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  3. Brynjolfsson, Erik & Hitt, Lorin M., 2004. "Computing Productivity: Firm-Level Evidence," Working papers 4210-01, Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
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  4. Erik Brynjolfsson & Lorin M. Hitt, 2000. "Beyond Computation: Information Technology, Organizational Transformation and Business Performance," Journal of Economic Perspectives, American Economic Association, vol. 14(4), pages 23-48, Fall. [Downloadable!] (restricted)
  5. Klein, Benjamin & Crawford, Robert G & Alchian, Armen A, 1978. "Vertical Integration, Appropriable Rents, and the Competitive Contracting Process," Journal of Law & Economics, University of Chicago Press, vol. 21(2), pages 297-326, October.
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  7. Brynjolfsson, Erik. & Hitt, Lorin M., 1995. "Paradox lost? : firm-level evidence on the returns to information systems spending," Working papers 3786-95., Massachusetts Institute of Technology (MIT), Sloan School of Management. [Downloadable!]
  8. Klette, Tor Jakob & Griliches, Zvi, 1996. "The Inconsistency of Common Scale Estimators When Output Prices Are Unobserved and Endogenous," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(4), pages 343-61, July-Aug.. [Downloadable!] (restricted)
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  9. Susan Athey & Scott Stern, 1998. "An Empirical Framework for Testing Theories About Complimentarity in Organizational Design," NBER Working Papers 6600, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Ann P. Bartel & Casey Ichniowski & Kathryn L. Shaw, 2005. "How Does Information Technology Really Affect Productivity? Plant-Level Comparisons of Product Innovation, Process Improvement and Worker Skills," NBER Working Papers 11773, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Lucia Foster & John Haltiwanger & Chad Syverson, 2005. "Reallocation, Firm Turnover, and Efficiency: Selection on Productivity or Profitability?," Working Papers 05-11, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
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  12. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August. [Downloadable!] (restricted)
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  13. George P. Baker & Thomas N. Hubbard, 2003. "Make Versus Buy in Trucking: Asset Ownership, Job Design, and Information," American Economic Review, American Economic Association, vol. 93(3), pages 551-572, June. [Downloadable!]
  14. Susan Athey & Scott Stern, 2002. "The Impact of Information Technology on Emergency Health Care Outcomes," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 399-432, Autumn.
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