The Impacts of Open and Proprietary IT on Vertical Firm Boundaries

Extensive researches have studied the relationship between IT and vertical firm boundaries, but few has distinguished between different types of IT. This study divides IT into two categories, open IT and proprietary IT and proposes that the impacts of open IT and proprietary IT on vertical firm boundaries are different. Moreover, we also hypothesize that industry dynamism has moderating effects on these relationships. We use the panel data from U.S. Bureau of Economic Analysis (BEA) to test these hypotheses. The results show that open IT has a negative effect on vertical scope of firms while proprietary IT has a positive effect on vertical scope. Furthermore, with the increase of industry dynamism, open IT has a further negative effect on vertical scope while proprietary IT has a further positive effect on vertical scope. This study suggests that different types of IT have different impacts on vertical firm boundaries, which provides implications for both research and practice.