Information Technology (IT) is considered as a strategic weapon that can be used to secure competitive advantage. Most of the relevant studies in this domain seek to make the case through the development of conceptual frame works, and ex post examples of successful deployment of strategic IT. Empirical evidence, however, suggest that many strategic IT investments became unfortunate strategic necessities rather than means of gaining competitive advantage. Thus, many questions regarding the economics of strategic IT remain unanswered. The research analyzes IT investments under various competitive situations through the development of formal economic models. The research consists of three studies in distinct but related areas within strategic IT. The first study involves IT related quality competition in a setting where two firms have the opportunity to improve the quality of their services through IT investment. The research analyzes the division of technology related benefits between the firms and the consumers, and the impacts of technological improvements on investment levels. The second study focuses on competition through IT innovation. It analyzes the IT investment incentives of a market leader and a challenger, and characterizes situations in which there may be a reversal of such incentives. Adoption of interorganizational systems is the topic of the third study. In particular, the optimal adoption times of an Electronic Data Interchange network by supplier firms are studied. The research is based on the Industrial Organization (IO) approach with both theoretical and empirical components. Game theory is used as a primary theoretical research tool. The studies enhance the understanding of many economic aspects of IT investments in competitive environments.
