The data dilemma: how availability can threaten the competitive advantage of data-based firms

Abstract

Purpose

This paper aims to expand knowledge on strategy and business model transformation by exploring how the increased data availability can threaten the competitive positioning of data-based firms.

Design/methodology/approach

The study uses two longitudinal cases design. The data include a review of 270 business acquisitions performed by IBM and Yahoo! between 1995 and 2018 relying on publicly available documentation, corporate annual reports, shareholders presentations and press releases.

Findings

The study provides insights into how the availability of data can affect business models and the competitive advantage of data-based firms. Successful business model transformation in data-based firms appear to be contingent on dual-purpose mergers and acquisitions (M&As), oriented toward data and data-processing activities.

Research limitations/implications

Inductive case studies yield results that require quantitative validation. The insights on business model transformation and M&As from this study were obtained within the context of data-intensive firms.

Practical implications

When formulating a growth strategy through M&As, strategists need to consider whether the current state of their competitive positioning requires single purpose acquisitions (e.g. data or data-processing capabilities) or dual-purpose acquisitions.

Originality/value

As data becomes a commoditized asset, further research and guidance are needed to assess the impact of this phenomenon on data-based business models. This study fulfills an identified need to gain insights into the relationship between business model transformation and M&A activity.

Citation

Tsvetkov, N. and Chekanov, A. (2021), "The data dilemma: how availability can threaten the competitive advantage of data-based firms", Journal of Business Strategy, Vol. 42 No. 3, pp. 177-187. https://doi.org/10.1108/JBS-08-2019-0165