Contagion and Comovement in Technology Partnerships
By Aditya Karanam, Deepa Mani, Rajib Saha
Citation
Karanam, Aditya., Mani, Deepa., Saha, Rajib. (2024). Contagion and Comovement in Technology Partnerships .
Copyright
2024
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Abstract
We find that the stock market valuations of firms reflect information on their technology partnerships and that market performance and fundamentals of firms comove with peers engendered by these partnerships. Using granular, proprietary data on 22,040 technology outsourcing contracts implemented between 1989 and 2013, we document that the implementation of a strategic technology partnership situates the focal client and vendor in a larger community of clients and vendors with interdependent risks and payoffs that results in performance comovement within these communities. We further find that the portfolio of contracts of the focal firm, notably, compensation modes, moderates their comovement with the community. Fixed price [variable price] contracts, where the vendor [client] bears the risk of cost overruns and is the residual claimant of ex-post surplus, insulate the client [vendor] from performance shocks. Our results show that the stock market values technology partnerships and recognizes peer groups engendered by these partnerships that are not reflected in standard industry groupings. The results additionally support the potential shift in competition from between firms to between value networks.

Professor Deepa Mani is Professor of Information Systems and the Deputy Dean of Academic Programmes & Digital Learning at the Indian School of Business. Deepa’s research interests are at the intersection of technology, organisation, and society. She has demonstrated significant thought leadership on the business and policy implications of technological innovations and investments. Her research articles have been published in leading academic journals and extensively featured in refereed conference proceedings, edited book chapters, and popular media outlets. Deepa serves as a Senior Editor at Information Systems Research. Deepa’s research has also had widespread impact on business practice and policy. In recognition of her impact, she was awarded the prestigious INFORMS Information Systems Society (ISS) Practical Impacts Award in 2022.

Deepa has been appointed to serve on several expert committees of the Central and State governments to provide guidance on policies for the digital economy, digital interventions in key sectors, and catalyse grassroot impacts using technology. She also extensively coaches organizations, keynotes corporate leadership events, and conducts executive education in the areas of digital business models, digital transformation and technology product management.

Deepa completed her undergraduate education at St. Stephen’s College, Delhi University, Masters in Information Systems from Carnegie Mellon University, Pennsylvania, and her doctorate in Information Systems from the University of Texas, Austin.

Deepa Mani (1)
Deepa Mani

Rajib Saha is an Associate Professor of Information Systems at the Indian School of Business (ISB). He works broadly in the areas of Economics of IT and IT-enabled business models and data mining. His research explores questions related to crowds and platforms, pricing and operationalisation of digital goods, B2B contracts, network analytics, and more.

Prior to joining ISB, he taught graduate-level courses in the area of Operations Management and Information Systems at the University of Rochester, and worked in the IT industry for several years at organisations such as Oracle and Novell.

Professor Saha received his MS and PhD in Business Administration from the University of Rochester, New York and B.Tech. in Computer Science and Engineering from the Indian Institute of Technology, Kharagpur.

Rajib Saha
Rajib Saha