The Impact of Capabilities and Prior Investments on Online Channel Commitment and Performance

Abstract

Attracted by the promise of greater market exposure and increased revenues, firms across a wide variety of industries have undertaken significant investments in online channels. However, while some firms' entire business models revolve around this initiative, others have made only limited commitments to online channel ventures. What accounts for these marked differences in commitment to online initiatives, and do firms reap the performance benefits of increased levels of commitment? Furthermore, how do firms' internal and external capabilities affect their propensity to establish and succeed with online channel ventures? Drawing on marketing, innovation, and information systems perspectives, along with insights from the resource-based view of the firm, we propose an integrative conceptual framework that helps answer these questions. We ground our hypotheses in the context of retailers' online channel development efforts, and test our conceptual framework with data collected via a Web-based survey of 550 retailers. We find evidence of significant positive returns to investments in online channels. Furthermore, we observe the divergent effects of different sets of capabilities on commitment and performance. Importantly, although we find that the direct effect of firms' information systems capabilities on online performance appears to be negative, the indirect effect (mediated by commitment) is positive. Our study also examines the impact of firms' established distribution channels on levels of commitment to, and performance of, the online channel. We find that firms' established distribution channels act as double-edged swords, with divergent effects on commitment and performance. We also find evidence of diminishing returns to commitment as a function of established distribution presence, thereby suggesting that the rewards of commitment do not accrue equally to all firms.