RESEARCH ARTICLE

CAPITALIZING ON HEALTH INFORMATION TECHNOLOGY TO ENABLE DIGITAL ADVANTAGE IN U.S. HOSPITALS1

Elena Karahanna Terry College of Business, University of Georgia,

Athens, GA 30602 U.S.A. {ekarah@uga.edu}

Adela Chen College of Business, Colorado State University,

Fort Collins, CO 80523 U.S.A. {adela.chen@colostate.edu}

Qianqian Ben Liu College of Business, City University of Hong Kong,

Hong Kong, CHINA {ben.liu@cityu.edu.hk}

Christina Serrano College of Business, Colorado State University,

Fort Collins, CO 80523 U.S.A. {christina.serrano@colostate.edu}

This research examines hospital digital advantage, defined as a hospital’s technological edge relative to its competitors across a composite of technologies supporting the hospital’s various functions and processes. Drawing on Bourdieu’s forms of capital and the logic of digital options, we develop an integrative conceptual framework to identify and organize antecedents of digital advantage, which can translate to hospital performance through the creation of digital options. Focusing on the antecedents of digital advantage for our research model and hypotheses, we suggest that digital advantage is influenced by (1) economic capital, (2) institutional-arrangement-based social capital that results in knowledge sharing through information exchange networks and parent organization membership, (3) geographic-proximity-based social capital due to locational externalities that facilitate knowledge spillover, and (4) cultural capital that reflects the hospital’s health information technology (HIT) knowledge stock. Our findings, based on the aggregate adoption of 90 HITs by 953 hospitals, support main effects; complementary effects of the two forms of social capital; and substitutive effects between (1) economic capital and other forms of capital such that cultural capital and both types of social capital mitigate the effects of inadequate economic capital, and between (2) institutional- arrangement-based social capital and cultural capital such that knowledge shared through institutional arrangements mitigates the effects of having inadequate in-house HIT expertise. We also provide preliminary evidence to show that hospital digital advantage is positively associated with hospital performance.

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Keywords: Healthcare information technology, adoption, diffusion, knowledge spillover, cultural capital, social capital, economic capital, institutional-arrangement-based social capital, geographic-proximity-based social capital, Saidin index, digital advantage

1William Kettinger was the accepting senior editor for this paper. J. J. Po-An Hsieh served as the associate editor. The last three authors contributed equally and are listed in alphabetical order.

The appendices for this paper are located in the “Online Supplements” section of MIS Quarterly’s website (https://misq.org).

DOI: 10.25300/MISQ/2019/12743 MIS Quarterly Vol. 43 No. 1, pp. 113-140/March 2019 113

Karahanna et al./Capitalizing on Health IT for Digital Advantage

Introduction

Despite the United States’ spending more on healthcare per capita than other developed countries, it still demonstrates worse health outcomes (e.g., higher prevalence of chronic diseases) than its industrialized counterparts (Squires and Anderson 2015). Numerous studies have shown that health information technology (HIT)2 can improve quality of care (e.g., lower mortality rates, reduce medical errors, improve patient safety, and increase patient satisfaction), hospital efficiency, and financial performance (e.g., lower costs, increase revenue, and increase productivity) (for a review, see Agarwal et al. 2010). More recent research shows that HIT can help hospitals survive and thrive (Sheikh et al. 2015) and remain competitive (Bakshi 2012).

Given the importance of HIT to healthcare in general, and to hospitals in particular, our study leverages insights from Bourdieu’s (1986) forms of capital and the logic of digital options to examine the factors that enable hospitals to become digitally advantaged through the adoption of a portfolio of HITs. Digital advantage is defined as a hospital’s techno- logical edge relative to its competitors across a composite of technologies supporting the hospital’s various functions and processes. Our conceptualization of digital advantage focuses on a hospital’s stock of technologies relative to its compe- titors and captures both the number of HITs adopted and how rare these are in terms of their diffusion among hospitals. Rare technologies, “because they are expensive, new, or difficult to implement—are considered ‘high tech’” (Spetz and Baker 1999, p. 20) and receive more weight in our mea- sure of digital advantage since their rarity can be a source of differentiation. We argue that a composite of technologies supporting various functions and processes gives a hospital an edge because these technologies are a generator of digital options3 (e.g., enable the design of IT-enabled procedures, routines, and services) (Sambamurthy et al. 2003) that enable the hospital to take better competitive actions to enhance hospital performance.

Focusing on delineating the antecedents of digital advantage, we theorize that hospital digital advantage is influenced, individually and jointly, through substitutive and complemen- tary effects, by economic capital that reflects the hospital’s financial resources, cultural capital that reflects the hospital’s IT knowledge stock, and two forms of social capital: institutional-arrangement-based social capital that results in knowledge sharing through information exchange networks and multihospital system membership and geographic- proximity-based social capital due to locational externalities that facilitate knowledge spillover.

Our research contributes to the literature in three ways. First, we introduce digital advantage as a concept that captures the stock of an organization’s technologies weighted by their rareness. The focus on a composite of technologies spanning various hospital functions and processes is important because it is an organization’s digital advantage reflected in its stock of technologies—rather than a single technology—that is likely to generate digital options. Our measure is also relative to an organization’s competitors since it weighs the rareness of the technologies vis-à-vis one’s competitors. This techno- logical edge is important to generating high value digital options to enable competitive performance. Second and relatedly, with few exceptions, most IT adoption studies have focused on adoption of a single IT (see Appendix A). There has been little attention to what leads to an organization’s technology advantage. Factors leading to adoption of a single technology may be idiosyncratic to the specific technology and may not generalize to explaining digital advantage in general. Third, although our hypotheses focus on the ante- cedents of digital advantage, we propose an integrative conceptual model for digital advantage that provides an over- arching framework to both identify and coherently organize antecedents of digital advantage and to explicate how digital advantage can translate to hospital performance through the creation of digital options. From a practice perspective, our study provides a recipe for hospitals to choose, based on their available forms of capital, alternative strategies to achieve digital advantage and enhance hospital performance.

The paper is organized as follows. First, we conceptualize digital advantage and present our conceptual framework. We then review literature related to Bourdieu’s forms of capital to identify and coherently organize factors, derived from organi- zational and hospital adoption of IT, that influence an organization’s accumulation of technology stock. After developing our hypotheses, we describe our research method- ology, data analysis, and results. We conclude with a discussion of the contributions of our study and suggestions for future research.

2HIT refers to a conglomeration of technologies and tools that are used for the storage, retrieval, analysis, sharing, and application of healthcare information, data, and knowledge for the purposes of communication and decision-making (Health and Human Services 2013).

3Digital options are “a set of IT-enabled capabilities in the form of digitized enterprise work processes and knowledge systems” (Sambamurthy et al. 2003, p. 247).

114 MIS Quarterly Vol. 43 No. 1/March 2019

Karahanna et al./Capitalizing on Health IT for Digital Advantage

Theoretical Background

Conceptualizing Digital Advantage

The market of U.S. hospitals is regarded as a differentiated oligopoly where a few firms sell products or services that are differentiated on a few dimensions (Gaynor et al. 2013). Because prices are administratively regulated, vigorous com- petition on quality and other non-price dimensions is an important characteristic of such a market (Rivers and Glover 2008). HIT is a promising solution to help hospitals gain a competitive advantage. Research shows that hospitals are increasingly relying on HITs to help them survive and remain competitive (Bakshi 2012). For instance, hospitals that adopt less diffused technologies, such as telehealth, can leverage these technologies to provide unique services to patients and gain a competitive advantage in their market (Adler-Milstein, Kvedar and Bates 2014). Further, hospitals often leverage cutting-edge technology to attract medical expertise (primarily physicians) and patients. HITs have also been shown to reduce medical errors (e.g., Truitt et al. 2016), improve patient outcomes (e.g., Devaraj and Kohli 2003; McCullough et al. 2016), enhance patient care (e.g., King et al. 2014), improve physician productivity (e.g., Bhargava and Mishra 2014), increase hospitals’ market value (Kohli et al. 2012), and positively impact hospitals’ operational performance (e.g., Bhattacherjee et al. 2007) and financial performance (e.g., Setia et al. 2011; Sharma et al. 2016).

Although the majority of these studies focus on a single HIT, we argue that it is not a single technology but a rich compo- site of technologies supporting a hospital’s various functions and processes that gives the hospital a competitive advantage. Clearly, adopting a composite of technologies does not auto- matically lead to superior hospital performance. Our con- ceptualization of digital advantage is based on the logic of digital options, which are a set of strategic IT-enabled capa- bilities in the form of process capital and knowledge capital (Sambamurthy et al. 2003). As Sambamurthy et al. (2003) state, “digital options develop through an iterative learning process of integrating information technologies with business processes and knowledge” (p. 253). They describe digitized process capital as IT-enabled interorganizational and intra- organizational work processes that integrate a firm’s activities by providing a seamless flow of activities and information (process reach) while providing quality information about the performance of the process and transparency of this informa- tion to other systems or processes that need it (process richness). They describe digitized knowledge capital as both the IT-enabled knowledge repository and systems that enable employees to share their knowledge (knowledge reach) as well as systems of interaction for sense-making (knowledge richness). Clearly, the higher an organization’s stock of IT,

the more opportunities for leveraging IT to expand the reach and richness of its business processes and knowledge systems. As such, a hospital’s stock of HITs is viewed as a digital op- tions generator: when opportunities arise, a hospital’s stock of HITs allows the hospital to strengthen its processes and knowledge systems to achieve superior performance, espe- cially when the hospital’s stock of HITs includes technologies that are not widely diffused.

Consider the following example of how a composite of HITs can generate greater advantage than each HIT used alone. Electronic medical record (EMR) systems systematically collect and manage a wide range of patient health and clinical data (e.g., patient and diagnostic information, prescriptions, and lab results). However, many clinical activities (e.g., diagnoses and treatments) involve not only extensive informa- tion management but also complex care coordination, commu- nication, and decision making across providers. Hence, EMR adoption is ideally accompanied by computerized provider order entry (CPOE) to facilitate cross-provider care coor- dination and communication (McCullough et al. 2016). CPOE allows physicians to electronically enter orders for services and medications. Because of the direct order entry, CPOE reduces opportunities for miscommunication between different care providers. Clinical technologies such as elec- tronic medication administration records (eMAR) and picture archiving communications systems (PACS) can further extend the effective reach of EMR and CPOE systems, facilitating communications across disparate components of a medical team. Specifically, eMAR closes the loop in medication ordering and dispensing by connecting pharmacists to nurses. PACS facilitates communications with radiologists, improving the speed and quality of radiology test results. Therefore, adopting CPOE, eMAR, and PACS in conjunction with EMR (i.e., a greater stock of HITs) creates digital advantage in that it gives a hospital the “digital options” to strengthen the quality of information generated in the pro- cesses of patient care, the transparency of information from one process to others, and the efficiency of information flow across different hospital functions, which all serve to improve hospital performance. Furthermore, the rarer the use of these technologies among competing hospitals, the more compara- tive advantage these digital options can potentially confer to the hospital.

Another example of a composite of technologies generating digital options is the adoption of radio frequency identifi- cation (RFID) together with EMR and supply chain manage- ment systems (e.g., inventory, equipment, and pharmacy management systems) (Pasupathy and Hellmich 2015). Hos- pitals that adopt these technologies can issue RFID-enabled tags, which not only track the movement and location of patients, staff, and inventory (e.g., medications) but also link