IT Innovation Persistence and State Dependence: An Empirical Investigation

In this study we examine the persistence of a firm's ability to differentiate itself from its peers and stand out in a crowd of competitors through IT innovation. By using cross-sectional data set of large US firms from 1997-2004, our empirical evidence shows that prior IT innovation experience is an important determinant of current IT innovation capability even after we account for firm heterogeneity factors such as financial performance (halo effect), size, and industry. This evidence supports our proposition that there is a structural true state (path) dependence in the sense that prior IT innovation experience constrains future IT innovation choices and outputs. Therefore, the IT innovation capability is heterogeneously distributed and not easy to imitate.