Inter-firm collaboration and electronic business: Effects on profitability in Finland

This paper studies the joint effects of inter-firm collaboration and electronic business on firm profitability primarily in Finnish manufacturing. It is found that deeper forms of inter-firm collaboration boost financial performance but that high e-business intensity might even strain profitability. Firms that simultaneously have high inter-firm collaboration and e-business intensities as well as use electronic networks for conducting their collaboration are also more profitable. Based on this, two conclusions are drawn. First, suitable e-business practices facilitate inter-firm collaboration. Once in place, inter-firm collaboration tends to be immensely more productive with supporting electronic means. Second, e-business investment has to be accompanied with complementing organizational innovations, in this case a new form of external (and also internal, although not observed directly in the data used) organization of the firm, i.e., inter-firm collaboration.