Impact of a firm's physical and knowledge capital intensities on its selection of a cloud computing deployment model

Abstract

Cloud computing has become an increasingly common computing infrastructure for contemporary firms. An important decision for firms to make in adopting a cloud computing model is whether to build it in-house (a private cloud) or outsource it (a public cloud). Prior literature has focused on the impact of firms’ characteristics but generated inconsistent results regarding the selection of cloud computing models. To add to this line of inquiry, we consider the relative resource structure, which reflects the importance of physical and knowledge resources for individual firms, and examine their respective effects on the selection of cloud computing deployment models (CCDMs). Using data from 520 companies deploying cloud computing in mainland China, we find that firms with higher physical capital intensity (PCI) tend to outsource cloud computing, whereas those with higher knowledge capital intensity (KCI) tend to use private clouds. Firms with higher codified knowledge capital intensity (CKCI) are found to be more susceptible to the negative relationship between KCI and public cloud selection than those with higher tacit knowledge capital intensity (TKCI). The direct positive influence of regional legal protection on a firm's preferences for a public cloud is also confirmed, as well as its indirect moderating effect on alleviating the negative relationships between CKCI and deploying a public cloud.