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Investing in a Website: A Top Dog or a Resource-Based Strategy for Firms?

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Author Info
Martin, Ludivine
Penard, Thierry

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Abstract

This article is aimed at analyzing the motivations on the part of firms to invest in websites. What are the drivers behind such investments? In order to address this issue, we have considered two alternative theoretical frameworks. The first relies upon resourcebased theory; the approach herein states that firms with greater resources and competencies are expected to invest more heavily in Internet technologies, especially those firms present in rent-yielding markets (concentrated markets with strong entry barriers). The theory of industrial organization constitutes a second framework and leads to the alternative conjecture that firms should have more incentive to invest in a website when they are in highly-competitive markets. A website can indeed serve as a strategic means for creating artificial entry barriers and eliminating rivals. We have tested these two hypotheses using a French database and found the resource-based approach to be more relevant in explaining the drivers of website investment. In particular, firms tend to invest more in websites when markets are highly concentrated and little exposed to international trade.

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Publisher Info
Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2503.

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Date of creation: Sep 2005
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Handle: RePEc:pra:mprapa:2503

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Related research
Keywords: Internet strategy; e-commerce; entry barriers; resource-based theory;

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Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications
L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Cotterill, Ronald W, 1986. "Market Power in the Retail Food Industry: Evidence from Vermont," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 379-86, August. [Downloadable!] (restricted)
  2. Doi, Noriyuki, 1999. " The Determinants of Firm Exit in Japanese Manufacturing Industries," Small Business Economics, Springer, vol. 13(4), pages 331-37, December. [Downloadable!] (restricted)
  3. Nicolai J. Foss, 1997. "The Resource-Based Perspective An Assessment and Diagnosis of Problems," DRUID Working Papers 97-1, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies. [Downloadable!]
  4. Ruby Roy Dholakia & Nir Kshetri, 2004. "Factors Impacting the Adoption of the Internet among SMEs," Small Business Economics, Springer, vol. 23(4), pages 311-322, November. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Martin, Ludivine, 2009. "Understanding the implementation of e-business strategies: Evidence from Luxembourg," MPRA Paper 13645, University Library of Munich, Germany. [Downloadable!]
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