The impact of disruptive information technology innovations on firm performance : the case of REID adoption and its implications in fashion and textiles industries

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The impact of disruptive information technology innovations on firm performance : the case of REID adoption and its implications in fashion and textiles industries

 

Author: Lui, Kam Ha
Title: The impact of disruptive information technology innovations on firm performance : the case of REID adoption and its implications in fashion and textiles industries
Degree: Ph.D.
Year: 2015
Subject: Textile industry -- Management
Clothing trade -- Management.
Textile industry -- Technological innovations.
Clothing trade -- Technological innovations.
Business logistics.
Radio frequency identification systems.
Hong Kong Polytechnic University -- Dissertations
Department: Institute of Textiles and Clothing
Pages: viii, 133 leaves : illustrations ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b2798177
URI: http://theses.lib.polyu.edu.hk/handle/200/7892
Abstract: Disruptive information technology (IT) innovations provide remarkable opportunities to firmsparticularly fashion and textiles firmsfor operational efficiency and effectiveness improvement, cost reduction, and customer value enhancement. However, disruptive IT innovations can cause pervasive and radical changes to firms' operations, leading to uncertain impacts on firm performance. Previous studies have examined the impact of non-disruptive IT and suggested that the link between non-disruptive IT and firm performance depends on a range of contingency factors. However, those studies might not be applicable to disruptive IT innovations, and the moderating effects of institutional pressures and upper echelons attributes remain unknown. It is crucial for top managers to understand these issues to respond appropriately to emerging disruptive IT innovations. This dissertation aims to fill the above research gaps by examining the impact of disruptive IT innovations on firm performance from three perspectivesoperational performance, financial performance, and systematic riskand by investigating how top management team (TMT), firm, and industry level contingency factors affect that impact. We examine the impact of disruptive IT innovations based on the context of radio frequency identification (RFID), a disruptive technology that enables supply-chain business process innovation and thus increasingly utilized in fashion and textiles industries. By employing event study methodology, we examine "abnormal changes" in performance based on U.S.-listed firms that adopted RFID.
The results show that RFID adoption decreased inventory days (-2.92), accounts receivable days (-1.86), and operating cycle (-4.76), improved labor productivity (USD 3,660 per employee), sales growth (+2.19%), return on assets (+2.00%) and systematic risk (-0.20) over a five-year period (i.e., t - 2 to t + 3). Fashion and textiles RFID adopters and firms in the wholesale and retail industries had greater improvements in supply chain efficiency than did adopters in other industries and firms in manufacturing industries, but not for labor productivity and sales growth performance. The contingency factor analysis indicates that firms experienced higher supply chain efficiency under low institutional pressures. Moreover, firms experiencing coercive pressure, low industry competitiveness, good financial health, low level of business diversification, and high level of geographic diversification showed greater improvements in profitability. Finally, systematic risk was lower under greater TMT pay dispersion resulting from incentives and greater demographic heterogeneity such as age and gender heterogeneity. However, fast fashion and textiles neither obtained higher profitability nor lower systematic risk as a result of RFID adoption, suggesting that these industries must evaluate other contingency factors to improve their financial performance related to RFID adoption. This dissertation provides a theoretical foundation for the disruptive IT innovations literature by providing some of the first comprehensive and objective evidence of the impact of disruptive IT innovations on firm performance and the moderating effects of external and internal contingency factors. This dissertation also contributes to institutional theory and upper echelons theory by providing empirical evidence of the moderating effects of coercive pressure and TMT heterogeneity. The managerial implications of the contingency frameworks, which helps fashion and textiles firms identify opportunities of a disruptive IT innovation and maximize its benefits through strategic planning, are also applicable to firms in other sectors.

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