Dotcoms versus notcoms: The impact of Internet commerce on traditional firms

The confluence of several factors over the last few years has transformed the Internet from an experimenting ground for technophiles and hobbyists into an important and sophisticated forum for commerce. The emergence and growth of firms with innovative business models that exploit the inherent strengths of technology-enabled channels like the Web, alters the strategic landscape for traditional firms and poses new challenges. As traditional firms move online, both sets of firms now have to compete not only with similar rivals, but also with firms with different competencies, product offerings and business cultures. In addition, the differences between traditional and online channels sets the stage for interesting competitive dynamics and makes their study compelling.; My dissertation begins with a framework for e-commerce that serves as a building block for the three essays that analyze the impact of Internet commerce on traditional firms. The first essay models the strategic interaction between firms in online and traditional channels, focusing on the impact of three crucial channel-differentiating parameters on the competitive dynamics and on firms' positioning and pricing strategies in each channel. The study highlights the role of the hybrid firm as well as the optimality (or the lack thereof) of the novel business models that online firms have pursued.; The second essay examines the optimal timing of adoption of online retailing and the optimal positioning and pricing strategies online for traditional firms, in the face of cannibalization and competition. The study also analyzes the impact of differential channel characteristics and cost-structures on the optimality of the outcome. Contrary to conventional wisdom that advocates a hybrid strategy, the findings suggest that, in the presence of a superior channel, dominant competitive forces can make ‘exit’ an optimal strategy for traditional firms.; The final part of my thesis is an empirical study that analyzes the stock price changes to announcements of online retailing initiatives by traditional firms. While the results confirm that significant positive abnormal returns accrue to traditional firms adopting online retailing, the study finds significant cross-sectional variations that highlight the importance of various product, firm, and industry-related characteristics for firms' choice of technology-enabled channels.