THE ROLE OF INFORMATION TECHNOLOGY IN ALLIANCES AND MERGERS

181 Pages·2009·1.46 MB·English

by  Rackham Graduate School

THE ROLE OF INFORMATION TECHNOLOGY IN
ALLIANCES AND MERGERS
by

Ali R. Tafti

A dissertation submitted in partial fulfillment
of the requirements for the degree of
Doctor of Philosophy
(Business Administration)
in The University of Michigan
2009

Doctoral Committee:

Professor Mayuram S. Krishnan, Co-Chair
Professor Robert J. Franzese Jr.
Assistant Professor Sreedhar T. Bharath
Assistant Professor Nigel P. Melville
Assistant Professor Sunil Mithas, University of Maryland
© Ali R. Tafti 2009
DEDICATION

I dedicate this work to my parents, Mohammed and Shahnaz Tafti, who are my
greatest role models and two of my best friends; and also to my beloved wife Marmar,
who inspires me to persist and brings me great happiness.
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ACKNOWLEDGMENTS

I am grateful to members of my dissertation committee, and would like to
acknowledge them individually, although in no particular order. I would like to thank my
advisor and committee chair, Professor M.S. Krishnan, who recognized my potential and
encouraged me. This work would not have been possible without his generous support,
mentorship, and willingness to listen and help shape my ideas. Sunil Mithas has been an
excellent collaborator on many research projects with me, as well as a kind and generous
mentor through the years. Sunil has carefully reviewed and made valuable suggestions in
writing and analysis in many versions of the chapter entitled Information Technology,
Service-Oriented Architectures, and the Firm-Value Effects of Alliance Formation.
Sreedhar Bharath has provided many valuable suggestions and mentorship on the chapter
entitled The Effects of Information Technology Investment and Integration Costs on
Merger Value in the U.S. Commercial Banking Industry. Sreedhar has also helped me
improve my skills in econometric analysis. Nigel Melville has also been a mentor to me,
in many informal and formal meetings; he has read and provided valuable feedback on a
broad range of my writings; and he has greatly enriched the PhD experience for my
colleagues and me through his active presence in the department. Finally, I am deeply
grateful to Robert Franzese who, besides being an excellent teacher of econometrics, has
met with me regularly since the spring of 2008 to review the progress of my work and
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provide valuable feedback in each step of the way.
I would also like to extend my thanks for many valuable comments provided on
the empirical study on SOA, IT, and alliances by three anonymous journal reviewers,
participants at ICIS in Paris in 2008, INFORMS annual meeting in Seattle in 2007, Big
10 Information Systems Research Symposium at Purdue University, the University of
Michigan Business Information Technology Department seminar series, the Internal
Entrepreneurship Workshop, and the bi-annual STIET Research Workshop at the
University of Michigan for their valuable comments. Financial support was provided in
part by NSF IGERT grant no. 0114368.
I would also like to extend my thanks for many valuable comments provided on
the empirical study on IT and bank mergers by seminar participants at CIST in Seattle in
2007, and WISE in Paris in 2008. I thank Ben Fields, Chandra Pathuri, Sophia Zhuo,
Cory Simonds, and Robyn S. Wang for their assistance in data collection.
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TABLE OF CONTENTS

DEDICATION ii
ACKNOWLEDGMENTS iii
LIST OF TABLES viii
LIST OF FIGURES x
ABSTRACT xi
GENERAL INTRODUCTION 1

CHAPTER
I. Towards a Theoretical Framework of Information Technology in Alliances and
Mergers 3

I.1. Inter-Organizational Relationships and Governance Requirements

I.2 Contracting Hazards in the Role of IT in Inter-organizational Relationships

I.3 Coordination and Reconfiguration in Inter-organizational Relationships

I.4. A Dynamic Capabilities Perspective of IT-enabled Reconfiguration in Inter-
organizational Relationships

References

II. Propositions on the Value of Flexible IT Systems in Strategic Alliances 19

II.1. Contracting Perspective

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II.2 Coordination Perspective

II.3. Dynamic Capabilities Perspective

II.4. Conclusion: IT, Business Process Flexibility, and Strategic Flexibility

References

III. Information Technology, Service-Oriented Architectures, and the
Firm-Value Effects of Alliance Formation 46

III.1 Introduction

III.2 Theoretical Framework

III.3. Research Design and Methodology

III.4. Discussion

Appendix 1: More Variable Definitions
Appendix 2: Derivation of Baseline Tobin’s Q Model
Appendix 3: Coding and Verification of Alliance Attributes
Appendix 4: Unabridged Regression Tables
References
IV. The Effects of Information Technology Investment and Integration Costs on
Merger Value in the U.S. Commercial Banking Industry 104

IV.1. Introduction

IV.2. Background Literature

IV.3. Theory and Hypotheses

IV.4. Methods

IV.5. Results

IV.6. Discussion

References

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V. Final Considerations 165

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LIST OF TABLES

TABLE
II.1 Overview of Propositions and Key Constructs 40
III.1 Correlations and Summary Statistics 80
III.2 Baseline Value of IT Specifications 81
III.3 IT Interactions with JV and Non-Equity Alliances 82
III.4 SOA Interactions with JV and Non-Equity Alliances 83
III.5 SOA Interactions with Collaborative and Arms-length Alliances 84
III.6 Features of Collaborative Alliances 85
III.7 Examples of Collaborative and Arms-length Alliances 86
III.A1 Strong and Weak Keywords for Collaborative and Arms-length Alliance
91
Deal-text Content Analysis

III.A2 Cross-sectional Proportions of Alliance Formation Characteristics 91
III.A3 Baseline Value of IT Specifications, Unabridged Results 93
III.A4 IT Interactions with JV and Non-Equity Alliances, Unabridged Results 94
III.A5 SOA Interactions with JV and Non-Equity Alliances, Unabridged Results 96
III.A6 SOA Interactions with Collaborative and Arms-length Alliances,
97
Unabridged Results

IV.1 Variable Definition and Data Sources 140
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IV.2 Summary Statistics 142
IV.3. Pairwise Correlations Matrix 143
IV.4 OLS Regression Results including Control Variables: Cost Efficiency 144
IV.5 Abridged IVREG Results 146
IV.6 Abridged OLS Results for ROA and Deposits-To-Assets 147
IV.7 Abridged Cumulative Abnormal Returns (CAR) 148
IV.8 Cumulative Abnormal Returns, Comparison of IVREG Results with
149
Integration Costs and OLS Results with Proxy for Integration Difficulty

IV.9 Unabridged OLS Results for Profitability (ROA) 150
IV.10 Unabridged OLS Results for Customer Retention (DOA) 152
IV.11 Unabridged IVREG Results for Cost-efficiency, Including First-stage
154
Regressions
IV.12 Unabridged IVREG Results for Profitability, Including First-stage
156
Regressions
IV.13 Unabridged IVREG Results for Customer Retention, Including First-stage
158
Regressions

IV.14 Unabridged IVREG Results for CAR1 160
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