An Empirical Analysis of Software-as-a-Service (SaaS) Development Mode and Firm Performance
Yuanyuan Chen

We study the firm characteristics and industry factors that influence on-premises software providers' SaaS development modes (i.e., develop SaaS in-house or through M&A). We find that firms with solid marketing and R&D capabilities are more likely to create SaaS internally. In turn, internal development increases the firm's market share. However, firms that developed SaaS through M&A are more likely to face reduced gross profits. In addition, it will take relatively long for acquirers to benefit from the M&A of SaaS businesses. Our research has managerial implications for firms shifting from an on-premises business model to the SaaS business.

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