Evaluation of strategic investments in information technology
Communications of the ACM
An economic analysis of strategic information technology investments
MIS Quarterly - Special issue on the strategic use of information systems
Information rules: a strategic guide to the network economy
Information rules: a strategic guide to the network economy
Management Science
RE-Thinking the Network Economy: The True Forces That Drive the Digital Marketplace
RE-Thinking the Network Economy: The True Forces That Drive the Digital Marketplace
Winners, Losers & Microsoft; Competition and Antitrust in High Technology
Winners, Losers & Microsoft; Competition and Antitrust in High Technology
A Case for Using Real Options Pricing Analysis to Evaluate Information Technology Project Investment
Information Systems Research
Sequential Product Positioning Under Differential Costs
Management Science
Information Technology Investment Strategies Under Declining Technology Cost
Journal of Management Information Systems
Modeling the dynamics of network technology adoption and the role of converters
IEEE/ACM Transactions on Networking (TON)
International Journal of Electronic Finance
An Interdisciplinary Perspective on IT Services Management and Service Science
Journal of Management Information Systems
Competitive Behavior-Based Price Discrimination for Software Upgrades
Information Systems Research
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The declining cost of information technology (IT) over time provides the later entrant in information-intensive industries a cost advantage. On the other hand, the earlier entrant has the potential to build and retain its market share if consumers incur a cost in switching to the later entrant. We investigate the impact of a decline in the IT cost and the switching cost on IT investment strategies of firms. We find that a declining IT cost always hurts the early entrant's profit. The early entrant may assume an aggressive investment strategy or a defensive investment strategy in response to a decline in the IT cost, depending on whether the switching cost relative to the extent of decline in the IT cost is high or low, respectively. A decline in IT cost also hurts the later entrant's profit if the switching cost is high. A surprising result is that when the decline in the IT cost is higher than a critical value, a higher switching cost increases consumer surplus. When firms control the switching cost, the early entrant increases its investment in quality and switching cost and maintains its quality and its market-share leadership irrespective of the extent of decline in the IT cost.