IT Knowledge Spillovers, Absorptive Capacity, and Productivity : Evidence from Enterprise Software

We examine the productivity implications of external knowledge flows obtained through an Internet-enabled discussion forum in which IT professionals help one another solve problems related to the implementation and use of enterprise software. Consistent with the absorptive capacity framework (Cohen and Levinthal 1989, 1990), we show that IT spillovers are more likely to accrue to firms with prior related investments in advanced enterprise software and less likely to accrue when the external knowledge is more difficult to learn, such as for business functional knowledge or knowledge originating from relatively newer and emerging discussion forums. We also show that when knowledge is difficult to learn, the ability to derive the value of IT spillovers is more dependent on prior related IT investments. As with R&D investments, the dual role of IT investments has important implications for estimating their “true” rate of return