IDEAS home Printed from https://ideas.repec.org/p/iim/iimawp/wp01860.html
   My bibliography  Save this paper

Empirical Assessment of Coherence in Information Technology Firms

Author

Listed:
  • Karthik, D.
  • Basant, Rakesh

Abstract

Coherence is the ability to discover new – potentially profitable – combinations of various types of knowledge assets where complementarity is the basis for relevant combinations. Assets are considered complementary if doing (more of) any one of them increases the returns to doing (more of) others. Despite its strategic importance, few studies have addressed the issue of coherence in the Information Technology (IT) industry. This paper develops a novel methodology assess the extent of complementarity and coherence in the IT firms grounded in ‘sensemaking’, evolutionary economics, and strategic management. This paper uses managerial perspective for defining businesses. Managers and IT experts identify a typical IT firm based on the dimensions of applications (verticals) and specializations (service lines). Another feature of this paper is the use of survivor principle for assessing complementarity. The results on complementarity suggest that in case of applications, the boundaries between Transport & Ports and Airlines & Railways are getting blurred and these could become a generic combination. Similarly, in case of specializations Software maintenance migration and RDBMS, Datawarehousing & Datamining could become a generic combination. The results also suggest that there is substantial scope for improvement in coherence in both applications and specializations. Analysis of coherence also indicates greater fungibility of knowledge in applications than knowledge in specializations. Another finding is that the IT firms retain coherence with large number of applications but not with large number of specializations. Finally, as the number of applications and specializations reach a critical limit, the average coherence shows a definite decline.

Suggested Citation

  • Karthik, D. & Basant, Rakesh, 2004. "Empirical Assessment of Coherence in Information Technology Firms," IIMA Working Papers WP2004-12-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
    • Handle: RePEc:iim:iimawp:wp01860
    as

    Download full text from publisher

    File URL: https://www.iima.ac.in/sites/default/files/rnpfiles/2004-12-01rbasant.pdf
    File Function: English Version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. James A. Robins & Margarethe F. Wiersema, 2003. "The measurement of corporate portfolio strategy: analysis of the content validity of related diversification indexes," Strategic Management Journal, Wiley Blackwell, vol. 24(1), pages 39-59, January.
    2. Michael Gort, 1962. "Diversification and Integration in American Industry," NBER Books, National Bureau of Economic Research, Inc, number gort62-1, May.
    3. C. K. Prahalad & Richard A. Bettis, 1986. "The dominant logic: A new linkage between diversity and performance," Strategic Management Journal, Wiley Blackwell, vol. 7(6), pages 485-501, November.
    4. Richard P. Rumelt, 1982. "Diversification strategy and profitability," Strategic Management Journal, Wiley Blackwell, vol. 3(4), pages 359-369, October.
    5. Henry Mintzberg, 1990. "The design school: Reconsidering the basic premises of strategic management," Strategic Management Journal, Wiley Blackwell, vol. 11(3), pages 171-195, March.
    6. Michael Gort, 1962. "Introduction to "Diversification and Integration in American Industry"," NBER Chapters, in: Diversification and Integration in American Industry, pages 3-7, National Bureau of Economic Research, Inc.
    7. Comment, Robert & Jarrell, Gregg A., 1995. "Corporate focus and stock returns," Journal of Financial Economics, Elsevier, vol. 37(1), pages 67-87, January.
    8. Patel, Pari & Pavitt, Keith, 1997. "The technological competencies of the world's largest firms: Complex and path-dependent, but not much variety," Research Policy, Elsevier, vol. 26(2), pages 141-156, May.
    9. David J. Teece & Richard Rumelt & Giovanni Dosi & Sidney Winter, 2000. "Understanding Corporate Coherence: Theory and Evidence," Chapters, in: Innovation, Organization and Economic Dynamics, chapter 9, pages 264-293, Edward Elgar Publishing.
    10. Stefano Valvano & Davide Vannoni, 2003. "Diversification Strategies and Corporate Coherence Evidence from Italian Leading Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 23(1), pages 25-41, August.
    11. Sanjai Bhagat & Andrei Shleifer & Robert W. Vishny, 1990. "Hostile Takeovers in the 1980s: The Return to Corporate Specialization," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1990 Micr), pages 1-84.
    12. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Adrian Lüthge, 2020. "The concept of relatedness in diversification research: review and synthesis," Review of Managerial Science, Springer, vol. 14(1), pages 1-35, February.
    2. Emanuele Pugliese & Lorenzo Napolitano & Andrea Zaccaria & Luciano Pietronero, 2019. "Coherent diversification in corporate technological portfolios," PLOS ONE, Public Library of Science, vol. 14(10), pages 1-22, October.
    3. Tyson B. Mackey & Jay B. Barney & Jeffrey P. Dotson, 2017. "Corporate diversification and the value of individual firms: A Bayesian approach," Strategic Management Journal, Wiley Blackwell, vol. 38(2), pages 322-341, February.
    4. López Zapata, Esteban & García Muiña, Fernando Enrique & García, Susana María, 2019. "Analysing the relationship between diversification strategy and firm performance: the role of the economic cycle," Cuadernos de Gestión, Universidad del País Vasco - Instituto de Economía Aplicada a la Empresa (IEAE).
    5. Martynova, M. & Renneboog, L.D.R., 2005. "Takeover Waves : Triggers, Performance and Motives," Discussion Paper 2005-029, Tilburg University, Tilburg Law and Economic Center.
    6. Adrian Lüthge & Ulrich Pidun & Dodo zu Knyphausen-Aufseß, 2021. "Approximating relatedness from a business model perspective: towards a taxonomic approach," Review of Managerial Science, Springer, vol. 15(3), pages 813-846, April.
    7. Emanuele Pugliese & Lorenzo Napolitano & Andrea Zaccaria & Luciano Pietronero, 2017. "Coherent diversification in corporate technological portfolios," Papers 1707.02188, arXiv.org.
    8. Sharad Asthana, 2017. "Diversification by the audit offices in the US and its impact on audit quality," Review of Quantitative Finance and Accounting, Springer, vol. 48(4), pages 1003-1030, May.
    9. Chen, Chiung-Jung & Yu, Chwo-Ming Joseph, 2012. "Managerial ownership, diversification, and firm performance: Evidence from an emerging market," International Business Review, Elsevier, vol. 21(3), pages 518-534.
    10. E. Santarelli & H. T. Tran, 2013. "Diversification Strategies and Firm Performance: A Sample Selection Approach," Working Papers wp896, Dipartimento Scienze Economiche, Universita' di Bologna.
    11. Yu-Shan Chen & Ke-Chiun Chang, 2012. "Using the entropy-based patent measure to explore the influences of related and unrelated technological diversification upon technological competences and firm performance," Scientometrics, Springer;Akadémiai Kiadó, vol. 90(3), pages 825-841, March.
    12. Guerras-Martín, Luis Ángel & Ronda-Pupo, Guillermo Armando & Zúñiga-Vicente, José Ángel & Benito-Osorio, Diana, 2020. "Half a century of research on corporate diversification: A new comprehensive framework," Journal of Business Research, Elsevier, vol. 114(C), pages 124-141.
    13. Frantz Maurer, 1999. "L'influence des fluctuations boursières sur la performance financière de la firme diversifiée," Revue Finance Contrôle Stratégie, revues.org, vol. 2(4), pages 105-134, December.
    14. Dosi, Giovanni & Mathew, Nanditha & Pugliese, Emanuele, 2022. "What a firm produces matters: Processes of diversification, coherence and performances of Indian manufacturing firms," Research Policy, Elsevier, vol. 51(8).
    15. Joon Mahn Lee & Rahul Kapoor, 2017. "Complementarities and Coordination: Implications for Governance Mode and Performance of Multiproduct Firms," Organization Science, INFORMS, vol. 28(5), pages 931-946, October.
    16. Ron Adner & Peter Zemsky, 2016. "Diversification and Performance: Linking Relatedness, Market Structure, and the Decision to Diversify," Strategy Science, INFORMS, vol. 1(1), pages 32-55, March.
    17. Aparna Bhatia & Anu Thakur, 2016. "Diversification Strategies of Multi-national and Domestic Companies in India: A Comparative Evaluation in the Dynamic Environment," Management and Labour Studies, XLRI Jamshedpur, School of Business Management & Human Resources, vol. 41(3), pages 199-215, August.
    18. Marinelli, Federico, 2008. "Persistence of outstanding performance and shareholder value among diversified firms: The impact of past performance, efficient internal capital market, and relatedness of business segments," IESE Research Papers D/758, IESE Business School.
    19. Paola Giuri & John Hagedoorn & Myriam Mariani, 2002. "Technological Diversification and Strategic Alliances," LEM Papers Series 2002/04, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    20. Nicola Cetorelli & Michael G. Jacobides & Samuel Stern, 2021. "Mapping a sector's scope transformation and the value of following the evolving core," Strategic Management Journal, Wiley Blackwell, vol. 42(12), pages 2294-2327, December.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iim:iimawp:wp01860. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/eciimin.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.