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Write a summary of the theory, research design, analysis, and conclusions regarding each paper given below in two seperate papers. The summary of the theory, research design, analysis, and conclusion all the four has to be two pages each for research paper and 300 words per each research paper(Totally 600 word for two research papers) and in APA format with references of those in APA format. Most important Note : Everything should be in the APA format. d_f.pdf e_learning.pdf Unformatted Attachment Preview Diversification and Firm Performance: Exploring the Moderating Effects of Information Technology Spending T. Ravichandran, Yu Liu, Shu Han, and Iftekhar Hasan T. Ravichandran is an Associate Professor in the Lally School of Management and Technology at the Rensselaer Polytechnic Institute (RPI). His research expertise and interests are strategic implications of IT, electronic markets, innovation diffusion and assimilation, and organizational renewal and growth through innovation. His research in some of these areas has been funded by grants from the National Science Foundation, Ministry of Education, Singapore, John Broadbent Endowment for Research in Entrepreneurship, and Pontikes Center for the Management of Information. His research has been published in academic journals such as Communications of the ACM, Decision Sciences, European Journal of Information Systems, IEEE Transactions on Engineering Management, Information Technology and Management, Journal of Management Information Systems, Logistics Information Systems, and MIS Quarterly. He currently serves as an associate editor of Information Systems Research, department editor of IEEE Transactions on Engineering Management, and senior editor of Information and Management. In the recent past, he has served as a member of the editorial review board of IEEE Transactions on Engineering Management and associate editor of MIS Quarterly. He has also served as a guest editor for the ACM Database for Advances in MIS. Yu Liu is a Ph.D. candidate in the Lally School of Management and Technology, Rensselaer Polytechnic Institute. His research interests include strategic implications of IT, IT investing behavior, and the interplay between IT strategy and corporate strategy such as diversification and alliances. His research has been published in the proceedings of the Hawaii International Conference on System Sciences, the Decision Science Institute annual conference, and Information Technology and Management. Shu Han is an Assistant Professor of Information Systems at the Sy Syms School of Business, Yeshiva University. She earned her Ph.D. in MIS from Rensselaer Polytechnic Institute. Her areas of research include economies of IT, role of IT in firm innovation, and product/service strategy of IT vendors. Iftekhar Hasan is the Cary L. Wellington Professor of Finance at the Rensselaer Polytechnic Institute. His research interests are in the areas of corporate finance, investment banking, and capital markets. He has published numerous articles in reputed academic journals. Professor Hasan serves as an associate editor for a number of journals such as the Journal of Money, Credit, and Banking, Journal of Banking and Finance, Journal of International Money and Finance, and serves as an editor of the Journal of Financial Stability. Journal of Management Information Systems / Spring 2009, Vol. 25, No. 4, pp. 205–240. © 2009 M.E. Sharpe, Inc. 0742–1222 / 2009 $9.50 + 0.00. DOI 10.2753/MIS0742-1222250407 206 Ravichandran, Liu, Han, and Hasan Abstract: A large body of research has examined the performance effects of diversification. However, these results have been mixed, and scholars have called for examining contingencies under which the effects of different types (related, unrelated, geographic) and levels of diversification on performance vary. This study attempts to fill this gap in the literature by arguing that examining the performance effects of diversification is incomplete without taking into consideration the firm’s information technology (IT) spending. We posit that IT, by enabling coordination and control in firms, is likely to moderate the relationship between diversification and performance. Combining arguments from both resource-based view and the organizational controls literature, we theorize about the moderating effects of IT spending under different types and levels of diversification. Using data from large U.S. manufacturing firms, we test our research hypotheses. Our results indicate that while IT spending interacts with related diversification to have a positive effect on firm performance, similar interactions with unrelated diversification do not have any effects on firm performance. Furthermore, the interaction between IT spending and geographic diversification is positively associated with performance only when the level of geographic diversification is low. We interpret and discuss these results and highlight the theoretical and practical implications of our findings. Key words and phrases: business synergy, coordination and control, firm diversification, information technology, IT business value. Organizations both small and large have witnessed a sustained period of change in the past two decades in their form, structure, and scope. Many new organizational forms such as networked organizations and virtual corporations have emerged while firms’ scope or boundaries also seem to be changing. Interest in firm scope can be traced back to Coase’s [30] work on property rights. Referred to as the boundary that confines a firm’s businesses, firm scope and its interplay with other organizational factors have been an intriguing research subject. Among other factors, information technology (IT) has been credited with enabling changes in firms’ scale and scope [50]. The causal relationship between IT investments and firm scope (e.g., diversification and vertical integration) has been the focus of scholars in the information systems (IS) field who have used transaction costs economics to study the impact of IT on firm boundaries (see, e.g., [17, 36, 50, 60, 82]). The performance effects of changes in firm diversification have been extensively researched in the strategy and finance literature. The literature on diversification has been focused on the economic rationale behind the diversification–performance relationship. Depending on whether the new business is similar or related to existing businesses, firms may diversify into related markets or unrelated markets. Related diversification is believed to lead to better performance than unrelated diversification because the former leverages significant business synergies while the latter suffers from agency costs and inefficient resource allocation [3, 85]. Although the extant literature in this area is quite rich both theoretically and empirically, the empirical findings have not been consistent. Accordingly, diversification researchers have suggested and used a Exploring the Moderating Effects of Information Technology Spending 207 contingency perspective to scrutinize the diversification–performance link [32]. More recent studies have successfully explored contingencies such as home country environments [128], institutional environments [21], human capital [62], and managerial policies to maintain organization slack [43], thus supporting the contingency view of the diversification–performance linkage. Despite the inconclusive findings, diversification has been an effective firm strategy for growth. Managing diverse businesses, however, presents a great challenge to top managers. To ensure the competitiveness of their firms, managers have realized that changes in organizational factors such as structures and control arrangements must take place to fit diversification strategies. Such coadjustments not only are necessary to realize the benefits of diversification, but also lead to unique strategic combinations that are difficult for competitors to imitate. Besides, firms may also need to adjust certain corporate spending to the diversification strategy. For example, multibusiness firms outperform single-business firms when the former have a large research and development (R&D) expenditure [87], and related diversifiers spend more on R&D than do unrelated diversifiers [8, 67]. Like R&D, IT spending represents an important expenditure to be decided by corporate managers. Since previous research has shown that non-IT factors account for 50 percent of IT-enabled productivity enhancements [15], it is imperative to examine the context in which the IT expenditure occurs. Validated research findings, therefore, are needed to offer guidelines to corporate managers as to how IT spending should be adjusted to support a specific diversification strategy. If synergy is the principal motive and reason for firms to diversify [125, 126], then we may expect IT spending to have a significant role enabling such synergies because they build the firm’s coordinative capability and lower transaction costs. Recent studies in the IS literature have posited and found that IT reduces internal coordination costs [36, 60, 61], enables effective knowledge transfer across business units, and generally helps create synergies across business units [123]. These factors underpin the rationale for the diversification–performance relationship. Moreover, studies have also found that IT could impact the control systems in firms [4], which also have implications for the effectiveness with which diversified firms could be managed. Thus, it could be argued that examining performance effects of diversification in contemporary organizations is somewhat incomplete without considering the effects of IT; that is, the effect of diversification on performance could be different with and without appropriate IT spending. This study adds value to the IS and strategy literature by theorizing and providing empirical evidence that IT spending enhances the performance effect of certain diversification strategies but not others. Critical Review of Firm Diversification Research In this section, we provide a detailed review of past research on the diversification– performance relationship, identify gaps in this literature, and thereby set the stage for the work done in this paper. Firm diversification has received attention from strategy and finance scholars who have been interested in understanding whether diversification leads to improved firm performance. In recent years, the diversification–performance 208 Ravichandran, Liu, Han, and Hasan research has shifted from focusing on the relative performance of diversified and undiversified firms to a more fine-grained focus on the performance differences between unrelated and related diversifiers [97]. While the unrelated–related diversification dichotomy focuses largely on product diversification, for decades international management scholars have been exploring the competitive effects of international diversification as well [65]. The remaining part of this section will discuss product diversification and geographic diversification, respectively, with respect to their implications for firm performance. Table 1 summarizes the relevant literature on diversification–performance research. Performance Effects of Product Diversification Product diversification, the extent to which a firm operates in multiple and disparate product markets [65], has been extensively studied by strategic management researchers who often emphasize the benefits from diversification into related businesses. A recent review by Palich et al. [97] summarizes these studies by suggesting a curvilinear relationship between firm performance and the nature and level of diversification. Compared with single-business firms, firms engaging in related diversification are able to exploit synergies across product units by consolidating business activities in manufacturing, marketing, raw material purchases, and R&D, and thus achieve both scale and scope economies [3, 107]. For example, at Texas Instruments, defense electronics, semiconductors, and computer businesses share R&D activities and manufacturing facilities in an attempt to leverage efforts across units and gain necessary efficiencies [97]. In addition to improved learning curve efficiencies, intrafirm product/process technology diffusion [6] and enhanced market power [3] are also argued as the benefits associated with related diversification. In the long term, it is expected that related or moderate diversifiers will outperform their single-business counterparts and seize a better competitive position in the market. Nonetheless, as the diversification degree increases, the associated costs also escalate. Coordination costs with higher levels of diversification can increase significantly when the diversified firm has tapped into businesses that have little in common. The top management in unrelated diversifiers often has little firsthand knowledge of the operating affairs of a particular division’s industry, technology, or geographic region [37], further impeding coordination efforts. As a result, the marginal cost of diversification increases rapidly as it hits high levels, and one could conclude that firms experience some optimal level of diversification [97]. These arguments lead to the inverted U‑shaped relationship between firm diversification and performance. The mixed empirical evidence on the effect of diversification on performance casts doubt on the direct relationship between the two. Scholars have frequently reported conflicting results regarding whether and how diversification strategies are associated with firm performance. There is evidence that focused firms actually outperform diversified firms when performance is measured by Tobin’s Q [130]. Also, related diversifiers do not necessarily outperform unrelated diversifiers [96]. Alternative theoretical explanations [93], measurement issues [104], and incomplete model specifications [32] all Economic rationale Management issues Empirical findings Geographic diversification Scale and scope economies Transaction costs [62] Positive performance effects   [61, 73] Cross-subsidization [34]   [33, 44] Exploiting distinctive firm Negative performance effects   capabilities globally [17]   [23, 24, 25, 28] Functioning as financial An inverted U-shaped   intermediaries [39, 40]   relationship with   performance [62] Product diversification Synergies [3] or scope Coordination costs [95] Positive performance effects   economies [94, 105] Agency problems [83]   [82, 105] Technology diffusion [6] Inefficiency in resource Negative performance effects Market power [90, 91]   allocation [99, 109]   [3, 74, 94] An inverted U-shaped   relationship with   performance [44] Type of diversification Table 1. Summary of Studies on Diversification and Performance Exploring the Moderating Effects of Information Technology Spending 209 210 Ravichandran, Liu, Han, and Hasan account for the inconclusiveness of empirical findings. Perhaps most importantly, the process to realize diversification benefits is not costless. Relatedness exploitation, for example, is subject to inefficiencies arising from governance costs, incentive degradation, and bureaucratic distortions [97]. Until managers can effectively attend to these problems, the benefits from diversification may not readily materialize. Unlike strategy researchers, finance scholars in general view diversification as a value-decreasing strategy.1 As Martin and Sayrak [85] summarized, a consensus among finance researchers is that corporate diversification destroys shareholder value [31, 86, 110, 116, 118]. Evidence includes that diversified firms tend to have lower Tobin’s Q [76, 130], that they trade at discounts of up to 15 percent when compared to the value of a portfolio of comparable stand-alone firms [9], and that the stock market reacts favorably to increases in corporate focus [31]. Diversification allows firms to pool cash flows from divisions and reallocate cash to divisions in accordance with financial criteria, thereby setting up an internal capital market [106]. The access to an internal capital market, however, may provide managers a greater opportunity to overinvest because of excess or free cash flow, while being diversified makes it even more difficult to resolve the agency problem using equity participation [85]. Recent work [101, 111] has suggested that conglomerates may sell at a discount as a result of lower efficiency in resource allocation and not necessarily agency problems, as resources can flow toward the most inefficient division leading to less firm value. To sum up, corporate diversification is believed to be market inefficient because it runs against one of the oldest ideas in economics that specialization is productive [86]. Performance Effects of Geographic Diversification Geographic diversification is defined as expansion across the borders of regions and countries into different geographic locations or markets [65]. A firm can gain abovenormal returns by exploiting its firm-specific assets, especially intangible ones, in global markets [18], and the exploitation is further reinforced by imperfections found in markets for trading of these assets [34]. Empirically, Morck and Yeung [94] found that the degree of impact of geographic diversification is proportional to R&D and advertising expenditures, therefore supporting this internalization theory that the value of multinationality comes from intangible assets. Their finding is consistent with Mishra and Gobeli [88], who found that the combined effects of R&D expenditure and multinationality on market valuation are positive. Errunza and Senbet [40, 41] theoretically and empirically showed that multinational corporations (MNCs) experienced a positive valuation effect relative to purely domestic firms because of their role as financial intermediaries. MNCs provide investors who face differential cost barriers to direct holdings of assets across national boundaries with international portfolio diversification services. Benefits of geographic diversification could also be ascribed to scope and scale economies [75], improved market power, the spread of risks across international markets, and the ability to source lower-cost factor inputs [74]. However, geographic diversification does bear some significant costs as well. Finance scholars suggest that global diversification may have value-reducing effects because Exploring the Moderating Effects of Information Technology Spending 211 it can also lead to cross-subsidization of less profitable business units [35]. Some empirical studies have shown that capital markets penalize corporate multinationality by putting a lower value on the equity of multinational corporations [29], and this negative valuation effect has been consistent over the last two decades [24, 25, 26]. More recently, Lepetit et al. [77], in an event study, found that in general the market responds positively to geographic specialization type of mergers and acquisitions. Higher geographic dispersion substantially increases transaction costs and managerial information-processing demands [64], and as these costs outweigh the benefits, the effect on firm performance becomes negative. As an attempt to reconcile the conflicting empirical findings, Hitt et al. [65] proposed an inverted U‑shaped relationship between international diversification and firm profitability. It is interesting to observe the similarity in the effects of both geographic and product diversification on firm performance. Arguably, many of the costs associated with product diversification— coordination difficulties, information asymmetry, and incentive misalignment between headquarters and divisional managers—also apply to geographic diversification [80]. As Palich et al. observed, “This indicates increasing advantages as both product and global diversification rise, but it also demonstrates the negative utility of these activities beyond some optimal level of diversity” [97, p. 169]. In summary, while a large body of research has examined the performance effects of firm diversification, a key gap in this literature stream is the limited attention paid to how IT could affect the relationship between diversification and performance. ... 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