Information technology and product variety

This dissertation examines the relationship among Information Technology (IT), product variety (PV), and firm performance. A salient trend in manufacturing in the past 20–30 years is a sharp shift from mass production to product variety proliferation. This coincides with the IT revolution, when firms began to invest heavily in IT. The first essay examines the dynamics between IT and PV at firm level. The second essay examines PV\u27s impacts on firm inventory turnover and financial performance for manufacturing firms. The third essay examines product positioning strategy using online consumer review data. In the first essay, we propose that there is a complementary relationship between IT and PV. We construct a measure of product variety at the firm level using trademark counts. Overall, IT is found to be associated with increased product variety, and increased product variety increases demand for IT investment. This relationship is more evident in manufacturing firms and strongly reflected in firm valuation in the stock market. Furthermore, we find that IT boosts product variety mainly through enabling more product innovations rather than prolonging product life. We do not find evidence that product variety contributes to the IT productivity paradox suggested in the literature. Based on a sample of Fortune 1000 manufacturing firms over 1980–2000, the second essay examines the relationship between product variety and different inventory levels (raw materials, work-in-process, and finished goods), sales, and profit margin. We also consider how product variety influences the adoption of and benefits from the deployment of just-in-time (JIT) inventory practices. We find that (1) product variety is associated with greater finished goods inventory, but not raw materials or work in process inventories; (2) product variety is associated with increased sales but not profit margin; and (3) firms with higher PV level are more likely to adopt JIT. In the third essay, we examine firm\u27s product differentiation strategy based on the theories of hyperdifferentiation and resonance marketing. The major empirical innovation is to measure product positioning using online reviews. Using craft beer industry data, we find that those extreme products targeting at niche markets experience higher growth rate