US Software Industry Research Articles

Alliance with a Rival’s Partner and Firm Performance: Focused on the US Software Industry

Alliance with a Rival’s Partner and Firm Performance: Focused on the US Software Industry

Predicting firm failure in the software industry

Firm failure rate in the software industry is significantly higher than other industries. Due to the wide use of software products and services, failure in the software industry has implications on the industry itself as well as the economy at the local, national and global levels. This study compares the classification performance of thirteen approaches in terms of predicting firm failure in the US software industry. Seven measures are used to evaluate the classifiers’ performance. We use synthetic minority oversampling technique (SMOTE), SMOTEBoost and SMOTEBagging to account for the data imbalance issue. In order to give managers enough time to develop strategies and take the necessary actions to reduce the likelihood of failing, we use 20 financial indicators collected 4 years before the last available date about each firm. Our findings show that embedding SMOTE into boosting and bagging algorithms is better than preprocessing data using SMOTE before learning the classifier. According to the sensitivity analysis, research and development expense is the most significant predictor of firm failure followed by net sales and total revenue. Our results can be used by managers as a decision support tool to identify high-risk firms at an early stage and take the necessary actions to prevent a firm from failing. The early prediction of firm failure will allow software firms to modularize their products or services into specific “features” and offer them as “digital services” using new business models or combine these services with partner firms’ services to create new products and address evolving customer expectations. Moreover, the early prediction of firm failure in the software industry calls on firms, both new and those in the growth stage, to componentize their design for adaptability and to build agility in the way firms use their resource mix to address both market gaps as well as operational gaps.

When Do Acquiring Firms Earn Abnormal Returns

Prior research argues that acquirers need to enjoy private, unique and inimitable synergy benefits with the potential target to earn abnormal returns from that acquisition. Yet, our understanding of factors that enable acquirers to identify such unique and inimitable synergies remains somewhat under-developed. In this paper, we build on social network theory to show that the positional embeddedness of the acquirer, in terms of its central location in a network of inter-firm relationships, provides it with preferential and timely information about private synergies with potential targets that other firms cannot either identify or replicate and thereby, enjoy abnormal returns from such acquisitions. However, if the target is also centrally located in the same network, information regarding synergy benefits in combining with it is not “sufficiently private” and status conferred by the target’s own positional embeddedness allows it to negotiate away some of those benefits from the acquirer. We develop hypotheses to explain how the positional embeddedness of the acquirer and target firm have a direct and joint impact on the acquirer’s ability to realize abnormal returns to their acquisitions and find empirical support by studying 410 acquisitions in a network of 13, 104 inter-firm ties in the US software industry.

Spillovers, absorptive capacity and agglomeration

I study knowledge spillovers in an industry where firms are heterogeneous in their ability to adopt knowledge (absorptive capacity). I set up a model in which firms choose locations anticipating potential gains and losses from other firms’ R&D activity. I apply the model to the US software industry and obtain the following results: the data supports localized knowledge spillovers; firms that have higher absorptive capacity are sorted into more agglomerated counties; ignoring firm heterogeneity leads to biased estimates of gains from spillovers; spillovers play an important role in explaining the geographic distribution of firms, but only within regions with high R&D activity.

Cognitive Advantage: Effects of Holistic and Analytic Managerial Attention on Product Innovation

This study introduces the notion of holistic and analytic managerial attention to examine when and how managerial cognition either constrains or enables a firm’s new product introductions. Using data from new product introductions in public companies in the US software industry and creating a novel measure of holistic and analytic managerial attention with a text mining technique called topic modeling, we find two contingent effects of holistic and analytic managerial attention on new product introductions. Specifically, we find that software firms managed by top decision makers with holistic attention are more likely to quickly launch new products containing the feature of discontinuous technologies within their current product domains than those led by top managers with analytic attention. On the other hand, we obtain empirical evidence that software companies with analytic managerial attention are more likely to create novel product domains and introduce new products at those domains than those with holistic managerial attention. We discuss the implications of these findings for research in strategy and organizational learning. Particularly, we propose a theory of cognitive advantage that the firm’s ability to introduce new products is contingent upon the different styles of managerial attention.

Method‐Shifting in Aggressive Earnings Reporting: The Case of the US Software Industry's Response to New US Regulation

Abstract: Under rationality, firms should shift to alternative earnings management methods to achieve their earnings management goals whenever the alternatives provide greater benefit. New accounting regulation can alter the net benefit derivable from existing earnings management methods and thus may provide the impetus for method‐shifting. This study investigates whether firms circumvent regulatory‐imposed restrictions on their use of specific methods for accelerating earnings by shifting to alternative methods. Specifically, the study examines whether the US's adoption of a reporting standard that placed restrictions on the recognition of software revenue prompted US software‐firm managers to method‐shift to expense components for accelerated earnings reporting. A comparison of discretionary revenue and expense accruals and discretionary R&D expenses before and after the adoption of the standard confirmed a reduction of accelerated revenue recognition after the adoption and supported the hypothesized method‐shift to expense components for accelerated earnings reporting.

The US software industry

The US software industry is a combination of survivors, successful start-ups, and companies barely getting by. What is fueling the industry's growth? First, the potential of the Internet and networked and distributed computing is immense-we have only begun to tap into the possibilities. Many of our most innovative new companies are poised to take advantage of these new technologies. Second, the business and operational components of the nation's corporations are recognizing the fundamental role that PT now plays in their success. IT organizations are not the service and support centers of the past; they are an equal partner in the overall enterprise. Finally, Americans love new technologies. The software industry provides a never-ending source of innovative toys and gadgets for home and business.

Relative Value Relevance of R&D Reporting: An International Comparison

This study examines the relative value relevance of R&D reporting in France, Germany, the UK and the USA. France and the UK allow conditional capitalization of R&D costs, whereas Germany and the USA (except for the software industry) require the full and immediate expensing of all R&D costs. The relative value relevance of R&D reporting under different R&D accounting standards are compared while controlling for the reporting environment. Test results suggest that the level of R&D reporting has a significant effect on the association of equity price with accounting earnings and book value. The reporting of total R&D costs provides additional information to accounting earnings and book value in Germany and the USA (expensing countries), and the allocation of R&D costs between capitalization and expense further increases the value relevance of R&D reporting in France and the UK (capitalizing countries), including firms in the US software industry.

Software companies disappointed by encryption draft

The US software industry has given a muted welcome to the latest attempt by the US Government to allow companies to sell their strongest encryption products internationally.

Spinning off and spinning on(?): the federal government role in the development of the US computer software industry

The development of the US computer software industry has been powerfully influenced by federal government policy during the postwar period. Its importance for the demands of Cold War defense, especially strategic air defense during the 1950s, meant that the software industry received considerable support from federal R&D and procurement funding. But the very novelty of computer technology and software meant that a substantial portion of the defense-related spending in software was allocated to the creation of an infrastructure for the support of a new area of R&D, training, and technology development. From the earliest years of the postwar era, private industry has been responsible for a great deal of innovation in software; but by the late 1960s, these industrial innovations drew on research and manpower that had been generously supported by federal government funds. Our discussion of the federal role in the US software industry begins with a description of the earliest years of federal involvement in the U.S. computer industry, a period during which software scarcely existed as a distinguishable technology and focus of development effort. We then examine the federal role in supporting the emergence of computer science as an academic discipline, a discussion that spans 1955–1990. The concluding section summarizes our argument and suggests some points of contrast with the experience of other industrial economies.

Globalization of software supply and demand

PCs and industrial microcomputers are changing the software industry dramatically. Many developing countries are now entering the commercial software domain, and this trend should accelerate in the twenty-first century. Software use is also expanding rapidly on a global basis. The author considers how these trends are sure to have a major effect on the US software industry.< <ETX xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">&gt;</ETX>