Value Creation in Electronic Business through Information Technology Competence, Novelty and Complementarities: A Theoretical Framework and Empirical Evidence

Abstract

Although much of information systems research has been devoted to the study of electronic business phenomena, including the antecedents of electronic business performance, and the impact of electronic business technologies, not much research has examined the role of patenting information technology in value creation in electronic business. This is an important piece of the e-business phenomena because novel Internet business methods have been patented by several firms and serve as vehicles for value creation. In this paper, identifying patenting novel business methods or business processes as an important mechanism for value creation, I examine the determinants of the firm propensity to patent business processes or methods and the moderating role of such patenting on the impact of electronic integration and information sharing on revenues from e-business transactions. Using a secondary dataset of large firms from the US, and patent application data from USPTO, I analyzed the information technology research and development process and tested the impact of information technology patents on electronic business firm performance. I test two models for estimating the relationship between electronic integration, information sharing and patenting. The results indicate support for the moderating role of patenting on the effect of electronic integration with customers, on e-Business performance and strong support for the impact of information technology intensity on the firm propensity to patent. Specifically, investment in IT R&D did not have any effect on the firm's number of IT patents. However, the use of knowledge management systems contributed positively to the firm's number of IT patents. Investment in hardware resources and software applications had a significant impact on the firm's IT patents. Furthermore, IT patents did not have any effect on firm performance, but investment in IT software applications had a significant positive effect on firm performance. These results provide insight into IT R&D, IT innovation, IT patents and firm performance and the role of patenting business methods and processes in generating value from transactions in electronic business.