Firm Boundaries and Investments in Information Technologies

The objective of this paper is to analyse the relationship between information processing needs and capabilities. Both outsourcing and diversification influence the amount and the type of investments that firms perform in information technologies. In particular, we expect more vertically desintegrated firms to be more likely to use those technologies that facilitate interorganizational communication, such as e-business. Similarly, the coordination costs generated by diversification will create the need to invest in information technologies, specially in the case of related diversification. Our hypotheses are tested on a panel of Spanish manufacturing firms. Our findings are consistent with the hypotheses