IS integration and knowledge sharing in multi-unit firms: the winner's curse

Knowledge sharing across business units (BUs) is paramount for enterprises that aim to exploit latent cross‐BU synergies. This paper examines how information systems (ISs) integration and two forms of cross‐BU knowledge complementarities (workflow interdependence and BU relatedness) affect an important dimension of a firm's absorptive capacity – cross‐BU knowledge sharing. The analysis, performed on survey data from 75 enterprises, supports all of our hypotheses. First, we hypothesized that cross‐BU workflow serves as a conduit for knowledge transfer as participants continually engage in spontaneous adaptations. Second, IS application integration and cross‐BU relatedness should both directly contribute to knowledge sharing. Third, IS application integration should positively moderate the impacts of cross‐BU relatedness. Finally, and most interestingly, we hypothesized a redistribution of the effects of IS integration by which it becomes a key contributor to knowledge sharing, but also causes a reduction in the impact of workflow interdependence. Thus, while the seamlessness of high IS application integration has obvious benefits, it paradoxically also reduces the occasions for cross‐BU workflow adaptations, which is a key mechanism for knowledge transfer. That is the phenomenon we call the ‘winner's curse’.