Impact of Information Technology Capital on Firm Scope and Performance: The Role of Asset Characteristics

Abstract

This research draws on transaction-cost and resource-based theory to examine how information technology (IT) capital moderates the relationship between different types of assets and firm scope — both vertical integration and diversification. The analysis suggests that IT capital enables firms with narrowly valuable assets to be less vertically integrated and less diversified, and enables firms with broadly valuable assets to be more vertically integrated and more diversified. The moderating influence of IT capital on the relationship between different types of assets and firms’ vertical and product market scope is consistent with transactions-cost as well as resource-based traditions.