Firm boundaries and investments in information technologies in Spanish manufacturing firms

Abstract

The objective of this paper is to analyse the relationship between information processing needs and capabilities. We explore the consequences of variations in the vertical and horizontal boundaries of the firm on investments in information technologies. Contrarily to the existing literature, which postulates that less vertical integration implies more investments in information technologies, we argue that concurrent sourcing increases the likelihood of investing in the stock of information technologies. We also maintain that the type of technology analysed has to be taken into account when relating it to firm limits. In particular, we show that beyond-firm technologies are positively related with outsourcing, but diversification only has an influence on the technologies that are used internally. Our hypotheses are tested on a panel of Spanish manufacturing firms, offering general support to our arguments.