Towards a theoretical framework of

strategic decision, supporting capability

and information sharing under the context
of Internet of Things

Yuan Li, Mingjun Hou, Heng Liu & Yi

Liu

Information Technology and

Management

ISSN 1385-951X

Inf Technol Manag

DOI 10.1007/s10799-012-0121-1

1 23
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 Author's personal copy
Inf Technol Manag
DOI 10.1007/s10799-012-0121-1

Towards a theoretical framework of strategic decision, supporting

capability and information sharing under the context of Internet
of Things
Yuan Li • Mingjun Hou • Heng Liu •

Yi Liu

Ó Springer Science+Business Media, LLC 2012

Abstract The effective strategy of Internet of Things the enhancement of both market-based and technology-
(IoT) can help firms to grasp the emerging opportunities based exploitative capabilities.
from the IoT and then improve their competitive advan-
tage. In this article, based on organizational capability Keywords Internet of Things (IoT)
Strategic
perspective, we provide a theoretical framework which decision-making
Organizational capability

classifies IoT strategies into four archetypes from two Information sharing
dimensions of managers’ strategic intent and industrial
driving force, and propose that market-based exploratory
capabilities play a more important role for firms adopting 1 Introduction
get-ahead strategy, and market-based exploitative capabil-
ities play a more important role for firms adopting catch-up ‘‘The Internet of Things (IoT) is a technological phenom-
strategy in market. The technology-based exploratory enon originating from innovative developments and con-
capabilities play a more important role for firms adopting cepts in information and communication technology
get-ahead strategy in technology, and technology-based associated with: (1) Ubiquitous Communication/Con-
exploitative capabilities play a more important role for nectivity, (2) Pervasive Computing and Ambient Intelli-
firms adopting catch-up strategy in technology. Especially, gence’’ [95]. As an unprecedented technology and business
external industry information sharing more efficiently trend, IoT has brought enormous changes to global supply
contributes to the enhancement of both market-based and chain environments [55, 92]. On the one side, with IoT
technology-based exploratory capabilities, and internal development, the boundary of information communication
industry information sharing more efficiently contributes to is being penetrated and the structures of information chain
and supply chain are being reconfigured [1]. On the other
side, as an extension of the Internet, IoT fundamentally
Y. Li (&)
Y. Liu
transforms the speed and pattern of information exchange
Antai College of Economics and Management,
Shanghai Jiao Tong University, Shanghai 200052, China between remote objects [22]. Facing these opportunities
e-mail: llliyuan@sjtu.edu.cn and challenges derived from the IoT revolution, business
Y. Liu leaders are curious about how to conduct effective strategic
e-mail: liuyi76@sjtu.edu.cn decision towards IoT business [62, 96]. For instance, Li
[52, 53] suggested that there is a growing request for
M. Hou
managerial solutions of e-business systems in the process
School of Management, Xi’an Jiaotong University,
Xi’an 710049, Shaanxi, China of IoT implementation.
e-mail: xiaohou878787@163.com Existing literature on IoT can be primarily classified as
the resource-based perspective and the information system
H. Liu
perspective. From the resource-based perspective,
Lingnan College, Sun Yat-sen University, Guangzhou 510275,
Guangdong, China researchers more emphasize the opportunities and benefits
e-mail: liuheng8@mail.sysu.edu.cn about adopting IoT, considering IoT a critical factor for

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future value creation [45, 48]. Proponents of the informa- conclusions and discussion of theoretical and practical
tion system perspective pay more attention to E-business implications as well as future research directions.
[9, 32, 85], RFID [5, 47, 55] and IoT–SCM [38, 55, 73, 97],
responding to questions like what factors have impacts on
the adoption of IoT [75, 80] and how to overcome the 2 Strategic decision in the IoT context
obstacles in IoT application [23, 28, 46, 87]. Generally
speaking, these two approaches mainly focus on how IoT As an extension of the Internet, IoT could be the ‘next big
may be beneficial or detrimental to firms and how to thing’ for the whole business world [18]. In order to grasp
implement IoT, yet pay less attention on how firms this IoT opportunity, firms need to make the correct stra-
appropriately choose an IoT strategy. tegic decision. The firm’s strategic decision is the mech-
In contrast to the above two perspectives, we adopt a anism that is used to align a firm’s strategy with its
strategic perspective that emphasizes the importance of IoT competitive goal and environment [86] and is determined
strategic decision-making. To do so, we need to respond to by both external constraint conditions and the preferences
two key issues: (1) how to classify IoT strategy so firms of decision makers [70]. According to the strategic per-
can choose the appropriate strategy? (2) Which kind of spective, we regard IoT strategic decision as the positive
organizational capability can more effectively support the response of firms to the changing IoT environment in order
implementation of their respective IoT strategy? To solve to gain competitive advantage by using advanced IoT
the first issue, we provide the typologies of IoT strategies technologies. In the context of IoT use in business, external
by combining two dimensions: manager’s strategic intent constraints are mainly from the forces of IoT-related
(i.e., get-ahead or catch-up) and industrial driving force technology push and market pull [34, 87]. Meanwhile, the
(i.e., market pull or technology push). This typology not preference of the decision maker indicates the manager’s
only enriches the current literature on IoT classification, strategic intent for industrial positioning in the IoT busi-
but also gives useful guidance to business leaders who wish ness. Thus, we offer a typology of IoT strategic decision by
to choose appropriate IoT strategy. combining two critical dimensions of managerial strategic
For the second issue, some scholars provide theoretical intent (i.e., get-ahead or catch-up) and industrial driving
reasoning that successful implementations of a specific IoT force (i.e., market pull or technology push).
strategy could be largely dependent on whether the firm has
the appropriate internal capability foundations [10, 74]. 2.1 Industrial driving forces in the IoT context
Therefore, we probe the specific roles of organizational
exploratory and exploitative capabilities in the process of According to the development of IoT, IoT business evolves
IoT implementation, which enriches both the studies that through several stages from expediting logistics to tele-
focus on the ‘‘fit’’ between organizational capability and operation and tele-presence as a result of the interaction
strategy and the ambidexterity literature [66]. forces of both market pull and technology push. This
Furthermore, since effective information sharing can development roadmap indicates that the progress in rele-
help firms access useful information via the help of vant technology will continuously contribute to the devel-
advanced IoT technologies [33, 76, 88], we argue that IoT opment of IoT, while the commercialization in the market
supporting capabilities can be enhanced by appropriate place is another key issue relating to the progress of IoT.
information sharing mechanisms and firms who want to Therefore, we argue that IoT business is promoted by
strengthen their competitive advantage by the use of IoT industrial driving forces of both technology push and
need to improve their information sharing within and market pull. First, technology push is viewed as a new
across industries. Therefore, we also discuss the relation- invention being pushed through the development of related
ships between organizational capabilities and information technologies [82]. Rapid development of IoT technology
sharing in internal and external industry, which can enrich brings enormous potential to firms in IoT business [5]. For
the literature on information sharing and give a deeper example, many important technologies such as cloud
analysis of why internal and external industry information computing, RFID identification technology, and sensor
sharing have different effects on exploratory and exploit- network technology have promoted the development of IoT
ative capabilities in the implementation of IoT strategy. business to a new level [36, 87, 97].
The rest of the paper is organized as follows. In Sect. 2, Second, market pull is defined as an innovative force
we provide a typology of IoT strategies and describe four being developed by firms in response to an identified and/
archetypical IoT strategies. In Sect. 3, we propose a theo- or potential market need [82]. Enormous market demand in
retical framework of IoT strategic decision-making. In IoT business provides unprecedented market opportunities
Sect. 4, we develop related propositions based on the to firms [14, 40, 58]. For example, IoT applications in
framework and existing theories. We end the paper with home appliances, healthcare, and automobiles are pulled by

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new market demands like household demand for home strategy in market, get-ahead strategy in technology, and
automation, patient demand for customized service, and catch-up strategy in technology.
customer demand for intelligent vehicles [19, 37, 83].
Therefore, in this study, we view technology push and 2.3.1 IoT strategy 1: get-ahead strategy in market
market pull as two key driving forces which collectively
influence the IoT strategic decision making. Get-ahead strategy in market reflects firms adopting get-
ahead strategy so they can efficiently grasp opportunities
from strong force of market pull. The purpose of firms
2.2 Manager’s strategic intent in the IoT context
adopting this IoT strategy is to be the leading firm in
competition through developing IoT applications with
Despite the fast progress of IoT technology and the huge
market pulling and obtaining advantages of first movers
potential of the IoT market, there is also a high uncertainty
such as preemption of assets [27] and innovative reputation
in doing IoT business [91, 99]. Newly developed IoT
[67].
products may lack unified standards and may suffer a lia-
bility of newness in the market place [39, 56]. Meanwhile, Example 1 Haier, a leading home appliance manufac-
current technologies and business models in IoT business turer in China, is facilitated to use IoT technologies in their
change very quickly [36, 98], which causes significant products to fulfill the increasing demand for smarter
uncertainty on competition. Facing these challenges, firms appliances in the home appliance industry. As one of the
involved in IoT business need to choose their IoT strategy leading brands of white goods around the world, Haier has
appropriately. a high level of commitment to adopting leader roles and
From the strategic management perspective, get-ahead introducing the first IoT air-conditioners and IoT refriger-
and catch-up are two important approaches to organiza- ators to the national market. Therefore, Haier occupies a
tional innovation [61] and basic choices of firm strategy large share in the emerging market of household electrical
[58, 67]. In the IoT context, whether the CEO or the top appliances temporarily through adopting the get-ahead
management team wants to be a leader or a follower in IoT strategy in market. In the home appliance market, the
business is an important strategic intent, which causes the demand for intelligent appliances derives from the long
firm to formulate and implement get-ahead strategy or term demand for smart life, which provides safety, comfort,
catch-up strategy [30, 41], respectively. In this study, we convenience, and happiness to our life with remote control.
understand IoT get-ahead strategy as a set of plans and In our lives, we want to turn on the water heater before we
actions that are designed and implemented by firms earlier get home, or we want to turn off the light after we left for
than other competitors so as to obtain first-mover com- work. Being pulling by the market demand, Haier brings
petitive advantages in IoT business [16, 27]. When IoT fridge, IoT water heater, IoT washing machine to our
implementing get-ahead strategy, firms prefer to formulate lives as a pioneer in IoT appliances.
their advantages in reputation, economies of scale, cumu-
lative learning, and preferred access to suppliers or chan- 2.3.2 IoT strategy 2: catch-up strategy in market
nels because innovation reputation can help them to
effectively differentiate from their competitors [72]. In Catch-up strategy in market reflects firms adopting catch-
contrast, catch-up strategy is commonly understood as a set up strategy so they can utilize opportunities by efficiency
of plans and actions that are designed by firms to develop from the forces of market pull. The purpose of firms
IoT business through following and learning from the adopting this IoT strategy may include capturing market
industrial leaders’ movements. When implementing catch- demand [60], copying the successful case of the leader
up strategy, firms emphasize efficiency and quality, [16], and/or attacking the leader on this base [67].
because these firms need to remain efficient in order to
Example 2 When leading retail supermarkets such as
survive, develop, and even overtake the leader’s position
Wal-Mart have successfully developed some IoT technol-
[60, 67].
ogies in logistics, orders, and sales, we observe that several
local supermarkets learn from Wal-mart to improve the
2.3 A typology of IoT strategic decision efficiency of their logistics, orders, and sales by adopting of
these IoT technologies. Therefore, these local supermarkets
By evaluating IoT strategies of firms from both industrial choose catch-up strategy in market to expand their IoT
driving force (i.e., technology push or market pull) and business. In the retail industry, supermarkets provide a
managers’ strategic intent (i.e., get-ahead strategy or catch-up wide range of commodities including food, cosmetic,
strategy), we propose four categories of IoT strategies, as clothes, electronics, etc. In order to assure adequate sup-
illustrated in Fig. 1: get-ahead strategy in market, catch-up plies of products, supermarkets should deal with its huge

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Fig. 1 A typology of IoT Industrial driving force

strategic decision
Market Pull Technology push

Get-ahead strategy in market Get-ahead strategy in technology

Get-ahead Example: Haier Example: Cinterion

Strategic intent
Catch-up strategy in market Catch-up strategy in technology

Catch-up Example: Local Supermarket Example: Junmp

database and ensure the accuracy and timeliness of the Example 4 Junmp (a RFID technology provider in
information. When local supermarkets fail to satisfy the China) is a high-tech enterprise which concentrates on
requirements of customers by traditional supply chain producing RFID labels and readers. In 2010, Junmp signed
model, they turned to using IoT technologies for help. a cooperation agreement with the United States IMPINJ
(one of leading innovators for RFID), introducing the most
2.3.3 IoT strategy 3: get-ahead strategy in technology advanced technology of the ultrahigh frequency RFID
back-off encapsulation line, and making necessary adjust-
Get-ahead strategy in technology reflects firms who adopt ments upon this new technology for its own purposes.
get-ahead strategy so they can have possession of key new Therefore, Junmp has adopted catch-up strategy in tech-
technology in IoT or push the progress of IoT technology nology to get benefits from IoT development. When firms
by its strong R&D capability. The purpose of firms like Junmp have difficulties to develop cutting edge tech-
adopting this IoT strategy is to create advantages in nologies with limited technical innovation resources, they
development of technology patents and know-how [6, 11, usually go through a circuitous route by learning frontier
100]. By use of their advantages in IoT technology, firms technologies and develop them as their need so as to cope
who adopt this strategy may create new customer demand with changing technical environment.
more easily and achieve greater benefits.
Example 3 With the development of machine-to- 3 A theoretical framework of IoT strategic decision
machine (M2 M) technology, Cinterion (a supplier of
wireless modules for the cellular M2 M communication) Based on the organizational capability perspective [24, 66],
launched the new BGS2 module (the smallest module that in order to effectively support implementation of IoT
can be used in their M2 M solutions) in March 2011. By strategy, firms need to maintain and adapt their internal
doing so, Cinterion has successfully turned itself to be the capability foundations. Therefore, we put forward two
world leading player in this arena and enjoys a prestigious main issues to be solved. The first one is the need to
position among competitors. Many important related identify specific organizational capabilities to support the
technologies such as cloud computing, RFID identification strategic implementation of IoT business. The second is to
technology, and sensor network technology have been find the effective way to enhance the specific organiza-
increasing at a fairly high rate. Therefore, technology tional capability so as to support strategic implementation
suppliers should develop new technologies constantly in under different circumstances [10, 74].
their excelled area to keep competition advantages. From an organizational capability perspective [24, 66],
different IoT strategies may require specific organizational-
2.3.4 IoT strategy 4: catch-up strategy in technology supporting capabilities [74]. Meanwhile, during the process
of IoT business, organizational capabilities which support
Catch-up strategy in technology reflects firms adopting the implementation of IoT strategic decision could be
catch-up strategy so they can utilize new technologies in enhanced by efficiently sharing information internally or
IoT developed by other firms or get pushed by the fast externally [33, 76, 88]. Currently, the technologies of IoT
progress of IoT technology. The purpose of firms adopting has been applied to a variety of things and objects (i.e.,
this IoT strategy is to build their competitive advantages RFID tags, sensors, and actuators), which are able to
through effective assimilation and absorption of advanced interact and cooperate with each other to attain the aim of
technology and/or improving the technology on this base inter-communication, remote control and computer-aid
[26, 50]. decision [95]. Thus, we argue that the firms involved in IoT

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business can improve their supporting capabilities by breaking the existing dominant design and departing from
leveraging the IoT-related information sharing mechanisms the existing technology [57, 100]. These two types of
within and across industries. capabilities respectively support the IoT get-ahead strate-
gies under the contexts of market pull or technology push.
3.1 Identifying key supporting capabilities For the firms that implement catch-up strategy, we
under different IoT contexts define the third type of supporting capabilities as market-
based exploitative capabilities that support firms to
In existing organizational studies, the organizational capa- develop IoT application though effectively allocating IoT
bility refers to the knowledge, skills, and related routines resources for the existing market; and we define the fourth
that create and deliver superior customer value [20]. A type of supporting capabilities as technology-based
partition of organizational capabilities into exploratory exploitative capabilities that support firms to obtain IoT
capability and exploitative capability is raised by organi- technology by improving established designs and broad-
zational management researchers [29, 59, 94], which indi- ening existing skills without changing essential technology.
cates that exploration and exploitation may provide Based on the features of IoT strategies in Fig. 1, the
different supports to firms that implement get-ahead strat- exploratory- or exploitative-capabilities can provide dif-
egy or catch-up strategy in IoT business. March [59] viewed ferent supporting mechanisms to each strategic decision.
exploitation as ‘‘the refinement and extension of existing
competencies, technologies, and paradigms’’ and explora- 3.2 Capability-enhancing information sharing
tion as ‘‘experimentation with new alternatives that have in internal and external industry
returns that are uncertain and distant.’’ In the context of IoT
business, we view the exploitative capability as the ability In order to enhance the key supporting capabilities, firms
of a firm to invest resources to refine and extend its existing gain greater incentives for sharing information in both
IoT knowledge, skills, and processes. The main aim of IoT internal and external industry [33, 76, 88]. In addition, IoT
exploitative capability is to achieve greater efficiency and development provides unprecedented opportunities for
reliability of existing activities in IoT business [64]. In upgrading the information systems and allows firms to
contrast, exploratory capability in the IoT context refers to acquire information more timely and accurately [54, 55],
the ability of a firm to invest resources to acquire entirely therefore the implications of information sharing should be
new IoT knowledge, skills, and processes. Its objective is to given more attention in the study of IoT phenomenon.
obtain greater differentiated advantage by use of novel Following the information processing studies, some
innovation [64]. The tendency of whether firms leverage scholars have suggested that different information sources
exploitative capability or exploratory capability reflects may have different impacts on organizational learning
their investment attitudes, and influences the implementa- process and organizational capabilities [25, 43, 69]. For
tion effectiveness of different IoT strategies [11]. instance, Sorenson and Stuart [79] suggested that local
According to the capability-based view of firms, the search has the benefit of promoting firms to improve
organizational capability foundations and strategies that existing capabilities and can increase incremental innova-
firms adopt are closely connected [2, 81, 84], which indicate tion. On the contrary, Rosenkopf and Nerkar [69] sug-
that different strategies may require different supporting gested that firms spanning out of their organizational
capabilities [10, 63]. Therefore we argue that the effective- boundary may get a boost in radical exploration and long-
ness of organizational capabilities in supporting IoT strate- term performance.
gies depends on the fit between the organizational Information sharing traditionally refers to the mutual
capabilities and strategic decisions in the firm’s IoT business. sharing of market, technology, and business information
To be specific, the existing literature differentiates two between exchange partners [90]. In the context of IoT, the
types of capabilities on the basis of their (1) departure from efficiency of information sharing is largely improved by
the existing market segments and (2) advances of existing the advanced IoT technologies, and information sharing is
technology (Benner [6]). Together, we formulate four types used to exchange information with partner firms so as to
of supporting capabilities which can provide different support their IoT strategic decisions through improving the
supports to each IoT strategy. We view the first type of IoT-supporting capabilities. Specifically, there is a clear
supporting capabilities as market-based exploratory capa- difference between internal industry sources that are loca-
bilities that support firms to explore and integrate new ted within a firm’s industry and external industry sources
resources that are derived from the newly developed IoT that are located out of the focal firm’s industry [31, 43, 69,
market [6, 13, 100]. We view the second type of supporting 71]. Thus, we divide information sharing into internal and
capabilities as technology-based exploratory capabilities external industry information sharing, and indicate that
that support firms to obtain advanced IoT technologies by they may differently influence the improvement of IoT-

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supporting capabilities. In this study, internal industry market-based exploitative capabilities, technology-based
information sharing is to communicate and exchange exploratory capabilities, and technology-based exploitative
information with other firms in the same IoT industry as the capabilities) can differently support the implementation of
focal firm. On the contrary, external industry information four different IoT strategic choices.
sharing is to communicate and exchange information with Under the IoT context, market-based exploratory
other firms outside the industry of the focal firm. Specifi- capabilities are the capabilities that support firms to
cally, the more heterogeneous information firms possess, explore and integrate new resources that are derived from
the better firms achieve exploration through interaction of the newly developed IoT market [6, 13, 100]. When firms
these information sources; while the more homogenous implement get-ahead strategy in market, their purpose is
information firms possess, the better firms achieve strategic to be the leading firms in a certain domain through
conformity that enhances exploitation through the inter- developing IoT applications in products and services by
action of information sources [4, 31, 71]. Therefore, we leveraging the force of market pull [60, 67]. Market-based
indicate that there are different impacts of internal and exploratory capabilities can provide necessary support for
external industry information sharing upon the firm’s firms to obtain and maintain a leading status when
supporting capabilities under different IoT contexts. adopting get-ahead strategy in market through the fol-
Based on above discussion, we formulate the theoretical lowing paths.
framework in Fig. 2 and argue that in order to achieve First, through developing IoT applications in products or
competitive advantage and benefit from IoT business, firms services, market-based exploratory capabilities bring firms
need to appropriately make their IoT strategic decisions, an opportunity to establish an attractive market segment
accurately identify key supporting capabilities, and effec- [30]. The domination of market provides entry barriers
tively develop their supporting capabilities by information which may discourage the entry of competitors into their
sharing within internal and external industry. According to markets and thus they enjoy better performance [35].
the features of IoT business, we explain how firms within Second, market-based exploratory capabilities allow firms
IoT business realize their strategic objectives by examining to discover customers’ emerging demands ahead of their
the relationship among industrial driving forces, strategic competitors and to satisfy them more effectively by
intents of firms, supporting capabilities, and information offering more advanced products or services with IoT
sharing within and across industry boundaries. adopted [8, 11]. Once firms with this capability quickly
respond to the changing market demand and create brand
loyalty, they can discourage later entrants to enter, and
4 Proposal development maintain their favorable position in the market place [35].
Especially, in the rapidly changing environment of the IoT
4.1 The relationships between strategic decisions market, market-based exploratory capabilities can enhance
and supporting capabilities the inimitableness of company resources such as reputation
and quality of products and services, and create market
According to the different characteristics of organizational value for customers in the IoT market and thus ensure a
capabilities [24, 66], we argue that four archetypes of sup- better position as an industrial leader [100]. Therefore, we
porting capabilities (market-based exploratory capabilities, suggest:

Fig. 2 Conceptual model

Information sharing
Firm’s capability (FC) Strategic decision
Internal industry Get-ahead in market
Exploratory capability
information sharing or technology
Exploitative capability
External industry Catch-up in market
information sharing or technology

Industrial driving forces in IoT business

Technology push
Market pull

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Proposition 1 Market-based exploratory capabilities the rapidly developing environment of IoT technology,
play a more important role for firms adopting get-ahead technology-based exploratory capabilities allow firms to
strategy in market than other supporting-capabilities. constantly develop new technologies in the IoT domain for
staying ahead by searching, risk-taking, experimentation,
Under the IoT context, we define market-based
discovery, and innovation [59]. Because just refining and
exploitative capabilities as the capabilities that support
implementing existing technology is not enough to keep a
firms to develop IoT application by allocating IoT resour-
leader position in a fast-growing technology domain like
ces to the existing market effectively. When firms adopt
RFID technology [47], technology-based exploratory
catch-up strategy in market, their purpose is to copy the
capabilities become especially important for firms that
leader’s successful IoT application and re-develop it in the
want to adopt get-ahead strategy in technology [42].
industry environment [16, 60], or to attack the leader on
Therefore, we suggest:
this base [67]. Market-based exploitative capabilities are
beneficial to firms adopting catch-up strategy in market for Proposition 3 Technology-based exploratory capabili-
the following reasons. ties play a more important role for firms adopting get-
First, market-based exploitative capabilities can support ahead strategy in technology than other supporting-
firms to leverage their resources used in current business capabilities.
through coordinating and allocating IoT-related knowledge
Technology-based exploitative capabilities are the capa-
and maximizing the effectiveness of these resources [94],
bilities that support firms to obtain IoT technology by
thus ensuring their steady development of IoT applications
improving established designs and broadening existing skills
in products or services as a market follower [49, 78].
without changing essential technology. When firms adopt
Compared with exploratory activities, exploitative capa-
catch-up strategy in technology, their purpose is to effec-
bilities can reduce production and development costs
tively assimilate and absorb advanced technology from the
through learning from existing experience of a market
IoT industry leaders and/or improve the technology on this
leader [3]. Second, market-based exploitative capabilities
base [26, 50]. Technology-based exploitative capabilities
bring firms higher probability of success in IoT application
can improve the efficiency of introducing, digesting, and
[94], through the imitation of successful IoT applications of
absorbing advanced IoT technology and reduce the cost of
others in a certain market [17]. Compared with exploratory
adapting IoT technology, thus may support the catch-up
activities, market-based exploitative capabilities can pro-
strategy in technology more effectively.
vide a relatively low-risk way to extend the firm’s opera-
First, technology-based exploitative capabilities offer
tions and to ensure its status as a market follower [59].
firms a relatively low-risk way to benefit from the exploi-
Therefore, we suggest:
tation of existing IoT technology [17, 59]. Because
Proposition 2 Market-based exploitative capabilities exploration activities are traditionally more risky than
play a more important role for firms adopting catch-up exploitation [15, 51], technology-based exploitative capa-
strategy in market than other supporting-capabilities. bilities are more cost efficient for tech-follower firms to
improve IoT technology. Second, technology-based
Technology-based exploratory capabilities are the
exploitative capabilities provide firms an opportunity to
capabilities that support firms to obtain advanced IoT
expedite management of IoT technology through refine-
technologies by breaking an existing dominant design or
ment of existing technology [3]. Compared with explor-
departing from existing technology [58, 100]. When firms
atory activities, exploitation is a relatively easier way to
with technology-based exploratory capabilities adopt get-
create value [94] through improving established designs
ahead strategy in technology, their purpose is to obtain
and broadening existing skills without changing essential
satisfactory market share by use of their advantages in
technology, thus exploitation is fit for the purpose of catch-
technology patents and know-how [6, 11, 100]. Technol-
up strategy in technology. Therefore, we suggest:
ogy-based exploratory capabilities can enhance techno-
logical innovativeness and organizational flexibility in the Proposition 4 Technology-based exploitative capabili-
turbulent technology environment to support their get- ties play a more important role for firms adopting catch-up
ahead strategy in technology. strategy in technology than other supporting-capabilities.
First, technology-based exploratory capabilities foster
technological innovation in IoT technologies and help 4.2 The relationships between information sharing
firms to temporally dominate a profitable technology patent and supporting capabilities
pool [60, 94]. Firms possess privileges of using and
transferring novel technology through technology licensing Information systems researchers have advocated that
and application and get benefits from them [21]. Second, in effective information sharing brings business value to firms

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by obtaining essential knowledge [7, 12] and enhancing Similarly, for IoT technology providers, they generally
organizational capabilities [76, 88]. Since the internal and focus on IoT technology development and know more
external industry information sharing have different char- about tech-related information, such as information about
acteristics, they can differently affect the explorative frontier IoT technology and IoT technology trends, which
capabilities and exploitative capabilities in the IoT context. generates their technology perspective with relevant
Specifically, external industry information sharing may knowledge and cognition of IoT technology development.
bring more heterogeneous information, and the more het- When they share information with IoT product providers,
erogeneous information firms possess, the better firms they can gather more market-related information to make
improve the efficiency of exploration; while internal up their information shortage and add non-redundant
industry information sharing may bring more homogenous knowledge which can enhance their exploratory capabili-
information, and the more homogenous information firms ties [68, 89]. In addition, they can combine their technol-
possess, the better firms improve the efficiency of exploi- ogy perspective with the market perspective from external
tation. Thus information sharing mechanisms play a key industry information sharing, and thus are more likely to
role in enlarging respective capabilities. create new IoT technology applications than to just
On the one hand, external industry information sharing improve existing IoT technology [4]. As a result, we pro-
provides access to new ideas and heterogeneous informa- pose the following proposition:
tion that may enhance exploration [4, 31]. Generally
Proposition 5 External industry information sharing
speaking, firms that are not in the same industry as the
more efficiently contributes to the enhancement of both
focal firm generally operate in different environments and
market-based and technology-based exploratory capabili-
have different experiences and knowledge structures from
ties than both market-based and technology-based
the focal firm [4]. The focal firm is more likely to gather a
exploitative capabilities.
rich array of information when it access external industry
information sharing which ‘‘enriches the knowledge pool Meanwhile, internal industry information sharing pro-
by adding distinctive new variations’’ [44]. In this case, the motes strategic conformity to existing industry norms and
focal firm can get a broader scope of information and new recipes, thus may diminish abilities to identify too radical
perspectives through sharing information with firms out- opportunities or innovations [4, 31]. As the institutional
side their industry and then transfer their connatural cog- theory indicates, firms that are in the same industry as the
nition [68, 89]. On the other hand, firms located in a focal firm often have similar characteristics, similar ways
different industry from the focal firm are more likely to about how they organize operations, and similar cognitive
possess non-redundant information that adds exploratory frameworks that drive executive decisions (e.g., [77]).
knowledge to the focal firm [4]. Therefore, firms could be facilitated within the same tra-
Furthermore, information sharing between two or more jectory that contributes to more incremental and refining
different industries may result in greater non-conformity in activities when firms pay more attention to internal
the decision-making and the interaction of diverse infor- industry information sharing [65, 71]. Further, inward-
mation and decisions brings greater novelty in knowledge focused search (internal industry information search) has
learning and creation [69, 79]. All of above indicate that the benefit of allowing a firm to upgrade existing compe-
external industry information sharing is beneficial for tencies and to refine existing knowledge, which can lead to
firms’ exploratory capabilities. an increase in the level of exploitation instead of explo-
In the context of IoT business, firms that develop IoT ration [71, 79]. All of above indicate that internal industry
applications in products or services (we call them IoT information sharing is beneficial for firms’ exploitative
product providers) often know more about market-related capabilities instead of exploratory capabilities.
information such as knowledge on customers and their IoT In the context of IoT business, IoT product providers
product (or service) demand. Therefore, they have their know more about market-related information and thus
knowledge and recognition of IoT development from a generate the unique market perspective. When they
market perspective. When they exchange information with exchange information with firms that have the same way of
firms that develop IoT technology (we call them IoT developing IoT applications in products or services, they
technology providers), they could access to more tech- are more likely to share the same view of the future evo-
related information to add to their knowledge base and to lution of the market and thus to exchange and leverage
promote exploratory activities [68, 89]. Meanwhile, they their knowledge in an incremental manner [71]. Therefore,
also gain a technology perspective of IoT from this external these similarities support more incremental learning and
industry information sharing, which may challenge existing make exploitative learning more likely to succeed. Fur-
beliefs and allow for more exploratory endeavors in the thermore, internal industry information sharing of IoT
market place [4]. products (or services) makes the focal firm more focus on

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knowledge that is close to the existing knowledge base, get-ahead strategy in market, catch-up strategy in market,
thus creating a propensity toward exploitative learning get-ahead strategy in technology, and catch-up strategy in
[79]. technology, indifferent IoT contexts. This pioneering
Similarly, IoT technology providers know more about typology analysis allows firms in IoT business to more
tech-related information and thus may generate the domi- efficiently make their IoT strategic decisions according to
nant technology perspective in the firm. When they share their strategic intent and the IoT environment. Therefore,
information with similar firms as themselves, they this article echoes the call for more research to assess
strengthen the focal firm’s effectiveness of decisions on emerging issues related to IoT from a strategic perspective
technical aspects and the implementation of technology, [52, 62, 92, 93] and takes on the challenge of leveraging
because their cognitions of the development mode and matured strategic analytic tools (i.e., strategic typology
development tendency of IoT technology are similar [65]. approach) to analyze this IoT phenomenon.
Therefore, the similarities between partners facilitate Meanwhile, by detecting exploratory (or exploitative)
exploitative learning and make exploratory learning less capabilities as important for get-ahead strategies (or the
likely to happen. Furthermore, internal industry informa- catch-up strategies), our framework contributes to the
tion sharing in IoT technology facilitates the focal firm to understanding of how firms effectively execute their IoT
pay more attention to the technical information sharing, in strategies by leveraging different kinds of supporting
which information is exchanged for extending, recon- capabilities, and how firms maintain an appropriate balance
structing, and refining the existing IoT technological skills between exploration and exploitation considering their IoT
[71]. As a result, we propose the following proposition: strategies (i.e., get-ahead strategy and catch-up strategy).
While the need for the ‘‘fit’’ between organizational capa-
Proposition 6 Internal industry information sharing
bility and strategy has long been highlighted [10, 74], our
more efficiently contributes to the enhancement of both
study offers a new insight from an organizational capability
market-based and technology-based exploitative capabili-
perspective on the issue of why different types of IoT
ties than both market-based and technology-based
strategies may need respective support from explorative or
exploratory capabilities.
exploitative capabilities in the domains of IoT market or
IoT technology.
Our final contribution is that we propose that external
5 Discussion and conclusion
(or internal) industry information sharing enhances
exploratory (or exploitative) capabilities more efficiently,
The purpose of this article is to build a theoretical frame-
which extends the information sharing research in the IoT
work that can effectively explain how firms can correctly
domain. Bearing in mind the importance of information
choose their IoT strategy and strengthen relative supporting
sharing in enhancing the organizational capabilities [76,
capabilities through efficient information sharing within
88], our propositions expose the causality through a deeper
and across industries under different IoT contexts. By
analysis of why internal and external industry information
combining IoT industrial driving forces (i.e., both market
sharing have different effects on exploratory and exploit-
pull and technological push) with manager’s strategic
ative capabilities, which enriches research literature on
intents (i.e., both get-ahead and catch-up strategic intents),
information sharing and analyzes the differences between
we formulate four IoT strategies which can be chosen by
internal and external industry information sharing for their
firm decision makers. Extending the existing literature on
respective implications on the exploratory and exploitative
IoT research that follow the resource-based perspective
IoT capabilities.
[45, 48] and the information system perspective [23, 28,
46], our study contributes to IoT research by providing
5.2 Managerial implications
several important theoretical and managerial implications.
Besides its theoretical contributions, this paper also pro-
5.1 Theoretical implications vides valuable managerial implications for firms to main-
tain competitive advantage by efficiently adopting IoT
The primary contribution of our proposed framework is a strategy. First, the typology of IoT strategic decision is
finer-grained understanding about the strategic decision of helpful for managers to identify the suitability of the IoT
IoT by adopting a typology analysis. Specifically, by strategy they formulate. We also give examples of four IoT
evaluating IoT strategies of firms from both industrial strategies for managers to better understand the character-
driving force (i.e., technology push and market pull) and istics and essence of their chosen IoT strategy. These les-
manager’s strategic intent (i.e., get-ahead and catch-up), sons may help firms compete in this fast growing, yet less
we formulate four main categories of IoT strategies, known, field.

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Second, our results indicate that firms that intend to study argues that the exploratory and exploitative capa-
adopt a get-ahead strategy (or catch-up strategy) are bilities need to be continuously enhanced through infor-
expected to pay more attention to the internal enhancement mation sharing within and across industries. Based on
of exploratory capabilities (or exploitative capabilities). different characteristics of internal and external industry
For each IoT strategy, our results provide specific direc- information sharing, we indicate that external industry
tions for managers about how to increase the implemen- information sharing can efficiently improve exploratory
tation efficiency of IoT strategies through appropriate capabilities and internal industry information sharing can
enhancement of their key supporting capabilities. more efficiently enhance exploitative capabilities. Hope-
Third, we highlight the importance of information fully, the framework presented here will stimulate future
sharing within and across industries in the turbulent envi- research about IoT activities and will promote greater
ronment of the IoT context, which indicates that managers understanding of the future evolution of IoT business.
should pay more attention to the internal and external
industry information sharing in the process of IoT strategic Acknowledgments We thank both Guest Editors for their excellent
editorial guidance and two reviewers for their constructive comments.
decisions implementation. Our results suggest that internal This article is supported by Natural Science Foundation of China
and external industry information sharing have different (NSFC: 71132006).
influences on the respective supporting capabilities of IoT
strategies. Therefore, managers should devote resources to
build information sharing networks according to their own References
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