When your problem becomes my problem: The impact of airline IT disruptions on on‐time performance of competing airlines

• Author: Min‐Seok Pang,Brad N. Greenwood,C. Jennifer Tae
• Date: 01 February 2020
• DOI: http://doi.org/10.1002/smj.3090
• Published date: 01 February 2020

RESEARCH ARTICLE

When your problem becomes my problem: The

impact of airline IT disruptions on on-time

performance of competing airlines

C. Jennifer Tae

1

| Min-Seok Pang

2

| Brad N. Greenwood

3

1

Department of Strategic Management, Fox School of Business, Temple University, Philadelphia, Pennsylvania

2

Department of Management Information Systems, Fox School of Business, Temple University, Philadelphia, Pennsylvania

3

Department of Information Systems and Operations Management, School of Management, George Mason University,

Fairfax, Virginia

Correspondence

C. Jennifer Tae, Department of Strategic

Management, Fox School of Business,

Temple University, 1801 Liacouras Walk,

Philadelphia, PA 19122.

Email: jennifer.tae@temple.edu

Abstract

Research Summary: We study the effect of firm disrup-

tions on competitor performance in the presence of shared

resources in the U.S. airline industry. While scholars have

investigated both the effects of industry-wide and firm-

specific disruptions, little work has examined the effect on

competitors, who are increasingly reliant on interconnected

resources in the digital age. Results from a series of recent

information technology (IT) outages indicate that perfor-

mance is materially affected by a competitor's disruption.

While the disruption of a full-service carrier significantly

delays flights of all airlines leveraging its hubs, the exact

opposite is observed during the disruption of a low cost

carrier. Further, the effect is strongly moderated by the

type of airlines reacting to the disruption. Implications for

managers and theory are discussed within.

Managerial Summary: What happens to my operations

when a competitor's operations are disrupted? While

research has examined how a disrupted firm can recover,

little attention has been paid to competitors, except their

ability to exploit the disruption for economic gain. This is

problematic, as firms increasingly leverage interconnected

resources and infrastructure. We show that an airline's IT

outages affect on-time performance of competitors' flights

Received: 6 April 2019 Revised: 12 August 2019 Accepted: 14 August 2019 Published on: 8 October 2019

DOI: 10.1002/smj.3090

246 © 2019 John Wiley & Sons, Ltd. Strat Mgmt J. 2020;41:246–266.wileyonlinelibrary.com/journal/smj

to and from its hub airports. However, the effects depend

on both who is disrupted, and who is reacting to that dis-

ruption. The disruptions of full-service carriers (FSCs)

delay competitors' flights, but that of a low-cost carrier

(LCC) leads to early arrivals and departures. Further,

LCCs are significantly more nimble reacting to disruptions

compared to FSCs.

KEYWORDS

airlines, disruption, interdependence, on-time performance, shared

resources

1|INTRODUCTION

How do firms react when operations are disrupted? To date, numerous scholars across a swath of dis-

ciplines have tackled the implications of both disruption and its subsequent effects on firms and

industries. Unsurprisingly, results suggest that when confronted with an unexpected disruption, firms

experience a degradation in performance from which they work to recover (Chen & Garg, 2018;

Edmondson, Bohmer, & Pisano, 2001; Nelson & Winter, 1982). Yet, an assumption underlying

much of this work is that firms are independent entities, each with a full complement of resources,

and any firm's disruption is contained only to the firm itself (Christianson, Farkas, Sutcliffe, &

Weick, 2009; Edmondson et al., 2001; Wei, Ouyang, & Chen, 2017). This assumption is incongruent

with emerging research on ecosystems and industry architecture (Jacobides, Cennamo, & Gawer,

2018; Jacobides & Tae, 2015), as well as research on the platform-based economy (Kapoor &

Agarwal, 2017; Parker & Van Alstyne, 2005), which suggests that firms are becoming increasingly

interdependent. It is therefore incumbent upon scholars to take a broader view of disruptions and

consider the ramifications of disruption for firms who compete with the disrupted firm and leverage

shared resources and capabilities during the execution of their strategy.

Firms often do not fully control the corpus of capacities, resources, or inputs they need to bring

their products to market. Instead, they share them in the form of networked resources (e.g., among

alliance partners) and common suppliers or infrastructures (viz., those concomitantly utilized by

competitors; Frischmann, 2012; Lavie, 2006; Sturgeon, 2003). That is, firms draw on resources that

are not owned or fully controlled by themselves, but to which they have preferential access, to

achieve their aims (Helfat et al., 2007). This suggests that a disruption to a resource-sharing firm's

operation may have an impact on other firms that share the same resource; a line of inquiry which

remains conspicuously absent from the extant literature. This is concerning, as understanding the

implications for competitors arising from a firm's disruption is germane in many contexts, notably as

firms become increasingly interconnected by sharing resources and inputs for their daily operations.

In this work, we address this question by investigating whether and how the disruption of firms,

which are dependent upon a shared resource, affects nondisrupted firms relying on the same resource.

Formally, we ask: what is the effect of firm disruption on the performance of competitors who rely on

the same resource? Does the type of the firm that is disrupted moderate the effect? And, finally, does

the type of the competitor who is reacting to the disruption moderate the effect? While it is clear that a

disruption would lead to degradation in the focal firm's performance, due to its inability to carry out

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