IS integration and knowledge sharing in multi-unit firms: the winner's curse

Knowledge sharing across business units (BUs) is paramount for enterprises that aim to exploit latent cross-BU synergies. This paper examines how information systems (ISs) integration and two forms of cross-BU knowledge complementarities (workflow interdependence and BU relatedness) affect an important dimension of a firm's absorptive capacity – cross-BU knowledge sharing. The analysis, performed on survey data from 75 enterprises, supports all of our hypotheses. First, we hypothesized that cross-BU workflow serves as a conduit for knowledge transfer as participants continually engage in spontaneous adaptations. Second, IS application integration and cross-BU relatedness should both directly contribute to knowledge sharing. Third, IS application integration should positively moderate the impacts of cross-BU relatedness. Finally, and most interestingly, we hypothesized a redistribution of the effects of IS integration by which it becomes a key contributor to knowledge sharing, but also causes a reduction in the impact of workflow interdependence. Thus, while the seamlessness of high IS application integration has obvious benefits, it paradoxically also reduces the occasions for cross-BU workflow adaptations, which is a key mechanism for knowledge transfer. That is the phenomenon we call the ‘winner's curse’.