A Strategic Value Appropriation Path for Cloud Computing

Cloud-based information management is one of the leading competitive differentiation strategies for firms. With the increasing criticality of information management in value creation and process support, establishing an integrated capability with cloud computing is vital for organizational success in the changing landscape of business competition. These issues have received scant attention, however. We draw on the resource-based view, dynamic capability hierarchy concepts, and the perspective of operand and operant resources to suggest a cloud value appropriation model for firms. We argue that, to appropriate business value from cloud computing, the firm needs to effectively deploy cloud computing and leverage cloud operant resources as firm capabilities in a hierarchical fashion toward the development of cloud computing-based service models in order to reliably achieve the desired business outcomes. We propose a model encompassing the principles of infrastructure and cloud platform deployment, integration and service orientation, and alignment with business processes that explain the linkage from cloud computing to firm performance. We test this approach to value creation with a cloud computing implementation assessment model using a sample of 147 firms that have implemented cloud computing in India. Our analysis uncovers a strategic value appropriation path from cloud technological capability to firm performance via cloud integration capability, cloud service portfolio capability, and business flexibility. This research offers new insights regarding the underlying mechanisms for how cloud computing affects firm performance via cloud-enabled capabilities and the business functions that are supported by cloud capabilities.