Economic impacts of in-house and packaged software investments: the influence of software investment opportunities

Abstract

PurposeSoftware has become increasingly important in business. However, the value of aggregate in-house and packaged software investments and the influence of an industry's software investment opportunities (SIOs) are poorly understood in the literature. This study addresses this research gap and proposes that an industry's SIOs play an essential role in the economic impacts of industry in-house and packaged software investments.Design/methodology/approachA model of the economic impacts of in-house and packaged software investments at the industry level under different SIOs is developed and empirically tested based on a panel dataset of private industries in the USA between 1998 and 2020.FindingsThe results show that with the increase in the number of SIOs in an industry, the economic performance of in-house software investments increases, while that of packaged software investments decreases.Originality/valueBy highlighting the role of SIOs in moderating the economic performance of in-house and packaged software, this study shows the critical role of the information technology (IT) environment in understanding software's economic value.