Despite significant academic and managerial interest in big data, there is a dearth of research on how big data impacts long-term firm performance. Reasons for this gap include a lack of objective indices to measure big data availability and its impact, and the tendency of studies to ignore the costs associated with collecting and analyzing big data, assuming that big data automatically delivers benefits to firms. Focusing on how firms create and capture value from big data about customers, we use the resource-based view (RBV) and three dimensions of big data (i.e., volume, variety and veracity) to understand when the benefits outweigh the costs. Relying on the number of downloads of mobile device applications, we find that volume of big data has a negative effect on firm performance. This result suggests that the ‘bigness’ of big data alone does not ensure value creation for a firm, and could even constitute a ‘dark side’ of big data. Because big data variety – measured as the number of types of information taken per each application – moderates the negative effects of big data volume, simultaneous high values of volume and variety allow firms to create value that positively affects their performance. In addition, high levels of veracity (i.e., a high percentage of employees devoted to big data analysis), are linked to firms benefiting from big data via value capture. These findings shed light on the circumstances in which big data can be beneficial for firms, contributing to a better theoretical understanding of the opportunities and challenges and providing useful indications to managers.

1. The Promise of Digitalization:
Unpacking the Effects of Big Data
Volume, Variety and Veracity on
Firm Performance

2. The authors
Enzo Peruffo Ian P. McCarthyRaffaele OrianiFrancesco Cappa

3. Our paper
https://doi.org/10.1111/jpim.12545

4. Small and ancient data

5. Big data
• It is estimated that:
– society creates over 2.5
quintillion bytes (i.e., 2.5
billion terabytes) of data
every day, (IBM 2017)
– rising to approximately 90
Zettabytes per day in 2020
(i.e., 90 billion terabytes)
(Hayes and Cappa 2018).
– This growth is driven by
digitalization, the process of
generating, collecting and
analyzing data to create
value.

6. A flawed and general assumption

7. Big data come with many costs and risks
• Costs for:
– Collection,
– Storage,
– Processing
– Privacy and security
risks.
• Benefits include:
– Answer more
questions, more
completely to improve
most aspects of a
business.

8. Thus, a key argument in our paper is:

9. Don’t just create value, capture it
• Value is how much the data are worth.
If you sought to sell your big data, why
would someone value thid and how
much would they pay?
• Value creation is the act of collecting
data that have the potential for
benefits that exceed it’s costs.
• Value capture is the act of ensuring
that the data collected and their use
provide some form of return (financial
or non-financial).

10. The multi-dimensionality of big data
• To understand how to big data benefit firm performance, we focus
on the following dimensions of big data:
Big data
dimensions
Definitions Measures
Volume
Amount of data
collected
Number of mobile device
applications downloaded
Variety
Assortment of data
collected per
observation
Number of types of data
collected per application
Veracity
Reliability and
insightfulness of data
Percentage of employees
devoted to big data analysis

11. The study: context
• Firms in top 100 in USA for market
capitalization among S&P 500 index
• Big data volume = number of mobile
device applications used by
consumers from Google Play store
• Big data variety = number of
permissions for data collection for
each mobile device application.
• Big data veracity = percentage of
firm’s employees who are data
analysts based on LinkedIn and
Thomson Reuters Eikon.
• Long-term firm performance =
Tobin’s Q (i.e. market capitalization
over the total assets).

12. The study: What we found
• Big data volume alone negatively
impacts firm performance due to
the costs and risks associated with
collecting, storing and using the
data.
• High values of big data volume and
variety allow firms to create value,
as this dimension underlies
potential meaning and insight.
• High values for big data veracity
provide firms the expertise to
derive meaning and insight to
capture value and improve firm
performance.

13. In summary
• The promise of big data rests on understanding how the volume,
variety and veracity of this resource function to ensure it is valuable
for a firm.

14. The DOI (Digital Object Identifier) link to the
research paper that these slides are based is:
https://doi.org/10.1111/jpim.12545