Internet of Things and Competitive Advantage: A Dynamic Capabilities Perspective

Abstract

Internet of Things (IoT) is one of the enabling technologies of Industry 4.0. Although IoT has shown great promise for organizations, its practical use in generating value alone or in combination with existing IT capabilities remains unclear. Drawing upon the literature on dynamic capabilities and innovation capability, we propose IoT-enabled innovation capability (IoT-IC), consisting of three dimensions (IoT use for sensing, seizing, and reconfiguring) to explain competitive advantage. We examine three ordinary IT capabilities (flexible IT infrastructure, IT business experience, and relationship infrastructure) as the predictors of IoT-IC. We also test the moderating effect of competitive aggressiveness in influencing the relationship between IoT-IC and competitive advantage. Analysis of survey data from 175 U.S. companies provides empirical support for our research model. The results suggest that flexible IT infrastructure, IT business experience, and relationship infrastructure are positively associated with IoT-IC. Furthermore, the effect of IoT-IC on competitive advantage is positively moderated by competitive aggressiveness. The results point to the important role of existing IT capabilities in shaping IoT-IC and expand our understanding of the relationship between IoT-IC and competitive advantage at different levels of competitive aggressiveness.