Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

What factors contribute to the success or failure of software firms?

19.11.2010
Researchers from the University of Pittsburgh, McGill University, and the Georgia Institute of Technology examine causes of failure and success in the software industry

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!
Further information:
http://www.pitt.edu

More articles from Information Technology:

nachricht Construction of practical quantum computers radically simplified
05.12.2016 | University of Sussex

nachricht UT professor develops algorithm to improve online mapping of disaster areas
29.11.2016 | University of Tennessee at Knoxville

All articles from Information Technology >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Electron highway inside crystal

Physicists of the University of Würzburg have made an astonishing discovery in a specific type of topological insulators. The effect is due to the structure of the materials used. The researchers have now published their work in the journal Science.

Topological insulators are currently the hot topic in physics according to the newspaper Neue Zürcher Zeitung. Only a few weeks ago, their importance was...

Im Focus: Significantly more productivity in USP lasers

In recent years, lasers with ultrashort pulses (USP) down to the femtosecond range have become established on an industrial scale. They could advance some applications with the much-lauded “cold ablation” – if that meant they would then achieve more throughput. A new generation of process engineering that will address this issue in particular will be discussed at the “4th UKP Workshop – Ultrafast Laser Technology” in April 2017.

Even back in the 1990s, scientists were comparing materials processing with nanosecond, picosecond and femtosesecond pulses. The result was surprising:...

Im Focus: Shape matters when light meets atom

Mapping the interaction of a single atom with a single photon may inform design of quantum devices

Have you ever wondered how you see the world? Vision is about photons of light, which are packets of energy, interacting with the atoms or molecules in what...

Im Focus: Novel silicon etching technique crafts 3-D gradient refractive index micro-optics

A multi-institutional research collaboration has created a novel approach for fabricating three-dimensional micro-optics through the shape-defined formation of porous silicon (PSi), with broad impacts in integrated optoelectronics, imaging, and photovoltaics.

Working with colleagues at Stanford and The Dow Chemical Company, researchers at the University of Illinois at Urbana-Champaign fabricated 3-D birefringent...

Im Focus: Quantum Particles Form Droplets

In experiments with magnetic atoms conducted at extremely low temperatures, scientists have demonstrated a unique phase of matter: The atoms form a new type of quantum liquid or quantum droplet state. These so called quantum droplets may preserve their form in absence of external confinement because of quantum effects. The joint team of experimental physicists from Innsbruck and theoretical physicists from Hannover report on their findings in the journal Physical Review X.

“Our Quantum droplets are in the gas phase but they still drop like a rock,” explains experimental physicist Francesca Ferlaino when talking about the...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

ICTM Conference 2017: Production technology for turbomachine manufacturing of the future

16.11.2016 | Event News

Innovation Day Laser Technology – Laser Additive Manufacturing

01.11.2016 | Event News

#IC2S2: When Social Science meets Computer Science - GESIS will host the IC2S2 conference 2017

14.10.2016 | Event News

 
Latest News

Researchers identify potentially druggable mutant p53 proteins that promote cancer growth

09.12.2016 | Life Sciences

Scientists produce a new roadmap for guiding development & conservation in the Amazon

09.12.2016 | Ecology, The Environment and Conservation

Satellites, airport visibility readings shed light on troops' exposure to air pollution

09.12.2016 | Health and Medicine

VideoLinks
B2B-VideoLinks
More VideoLinks >>>