Throughout the 1990s and 2000s, news about 20-somethings becoming billionaires from the sale of their software companies flooded the media, giving the impression that a good idea was all it took to succeed in the software industry.
Jennifer Shang, an associate professor of business management in the Joseph M. Katz Graduate School of Business, along with colleagues Shanling Li of McGill University and Sandra Slaughter of the Georgia Institute of Technology, investigated what caused software companies to succeed or fail. Their research study, titled "Why Do Software Firms Fail? Capabilities, Competitive Actions, and Firm Survival in the Software Industry From 1995 to 2007," has been published in the journal Information Systems Research.
Because of low entry and exit barriers and low marginal-production cost, new-product development takes place rapidly in the software industry, says Shang. However, the industry's bankruptcy rate of 15.9 percent is much higher than the rates in other industries. For example, the bankruptcy rate in the pharmaceutical industry is 4.7 percent.
Shang and her colleagues examined software-company data collected between 1995 and 2007 from 870 firms. The collaborators looked at three aspects of internal business capabilities—marketing, operating, and research and development. They also examined two types of competitive actions: those that were innovation-related (product and marketing actions) and those that were resource-related (capacity and scale expansion, operations, service, mergers, and acquisition). They found that a higher operating capability has the greatest influence on a software firm's chance of survival. Firms with a greater emphasis on innovation-related competitive actions have a greater likelihood of survival, and this likelihood increases when the firms also have higher marketing and operating abilities.
The researchers divided the software industry into three subsections: sector one, which included desktop suites and other business-enabling software; sector two, which included video games and graphics software; and sector three, which included operating systems and security programs. Depending on their sectors, software businesses need a slightly different approach to investments, says Shang. Firms producing games, for example, must emphasize marketing, whereas companies making products with a long life cycle (such as operating systems) must focus on operating abilities and research and development. Traditional software companies, those producing desktop applications, should follow a strategy somewhere between these two approaches.
"Our research underscores the importance of operating capability in the software industry," says Shang. "Managers of knowledge-based firms often emphasize big ideas (innovation). Our study shows that operational efficiency is even more important for firm survival. Also, competitive strategies and dynamic actions will have more impact if they are supported by strong capabilities. In short, to improve performance and competitiveness, software companies should focus on synergies between firm capabilities and strategic actions."
Amanda Leff Ritchie | EurekAlert!
Cutting edge research for the industries of tomorrow – DFKI and NICT expand cooperation
21.03.2017 | Deutsches Forschungszentrum für Künstliche Intelligenz GmbH, DFKI
Molecular motor-powered biocomputers
20.03.2017 | Technische Universität Dresden
Astronomers from Bonn and Tautenburg in Thuringia (Germany) used the 100-m radio telescope at Effelsberg to observe several galaxy clusters. At the edges of these large accumulations of dark matter, stellar systems (galaxies), hot gas, and charged particles, they found magnetic fields that are exceptionally ordered over distances of many million light years. This makes them the most extended magnetic fields in the universe known so far.
The results will be published on March 22 in the journal „Astronomy & Astrophysics“.
Galaxy clusters are the largest gravitationally bound structures in the universe. With a typical extent of about 10 million light years, i.e. 100 times the...
Researchers at the Goethe University Frankfurt, together with partners from the University of Tübingen in Germany and Queen Mary University as well as Francis Crick Institute from London (UK) have developed a novel technology to decipher the secret ubiquitin code.
Ubiquitin is a small protein that can be linked to other cellular proteins, thereby controlling and modulating their functions. The attachment occurs in many...
In the eternal search for next generation high-efficiency solar cells and LEDs, scientists at Los Alamos National Laboratory and their partners are creating...
Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are less stable. Now researchers at the Technical University of Munich (TUM) have, for the first time ever, produced a composite material combining silicon nanosheets and a polymer that is both UV-resistant and easy to process. This brings the scientists a significant step closer to industrial applications like flexible displays and photosensors.
Silicon nanosheets are thin, two-dimensional layers with exceptional optoelectronic properties very similar to those of graphene. Albeit, the nanosheets are...
Enzymes behave differently in a test tube compared with the molecular scrum of a living cell. Chemists from the University of Basel have now been able to simulate these confined natural conditions in artificial vesicles for the first time. As reported in the academic journal Small, the results are offering better insight into the development of nanoreactors and artificial organelles.
Enzymes behave differently in a test tube compared with the molecular scrum of a living cell. Chemists from the University of Basel have now been able to...
20.03.2017 | Event News
14.03.2017 | Event News
07.03.2017 | Event News
24.03.2017 | Materials Sciences
24.03.2017 | Physics and Astronomy
24.03.2017 | Physics and Astronomy