The Effect of Internet Usage on Cooperation and Performance in Small Hotels

By Domke-Damonte, Darla; Levsen, Virginia B. | SAM Advanced Management Journal, Summer 2002 | Go to article overview
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The Effect of Internet Usage on Cooperation and Performance in Small Hotels

Domke-Damonte, Darla, Levsen, Virginia B., SAM Advanced Management Journal

As information technology usage has increased greatly due to more user-friendly applications, cheaper and faster software and hardware, and major advances in telecommunication capabilities and usability, more business are including the Internet in their strategies. But how does an Internet strategy help small businesses balance competitive instincts with the need to manage uncertainty through cooperative moves? And does the inclusion of the Internet at a strategic level affect their overall performance?

While significant research has explored the use of competitive moves (c.f., Smith, Grimm, Gannon, & Chen, 1991; Ferrier, Smith, & Grimm, 1999), the use of cooperative moves (Powell, Koput, & Smith-Doerr, 1996; Ingram & Inman, 1996; Domke-Damonte, 1999), and the impact of Internet technology on businesses (Aguer & Gallaugher, 1997; Lamb, 1996; Barua, Kriebel, & Mukhopadhyay, 1995), these studies have predominantly developed and tested their hypothetical relationships in large, publicly traded companies. The purpose of this research was to explore the relationship between cooperation and performance in small businesses that use the Internet versus those who do not access the Internet or have an Internet presence.

Several factors supported the need to extend this stream of research to the small business sector. Much of the work on interorganizational cooperation is based either at the community level through sociological studies or at the level of the very large for-profit organization. Furthermore, while resource flexibility is a key factor in the use of cooperation in larger firm settings (c.f., Powell et al., 1996; Domke-Damonte, 1999), little has been done to study cooperation in resource-constrained small businesses, with exceptions noted in Domke-Damonte, Levsen, Ciunga, Jeram, and Utterback (2000) and the literature dedicated to outsourcing studies. Given the limited unused resources available to small organizations (Meyer, 1982), this issue would seem particularly pressing for these firms.

With a hyperturbulent competitive environment (D'Aveni, 1994) and the ability of large organizations to squeeze out smaller competitors with pricing competition and promotional campaigns (Kreps & Wilson, 1982), cooperation for small businesses may be tantamount to survival through enhanced standing and legitimacy in the firm's local environment. However, the autonomy-seeking behavior characteristic of entrepreneurs and the self-directed behavior that drives small business owners (Baucus & Human, 1994) would seem to be at odds with the increased interdependence resulting from cooperation. As an example, small hotel owners tend to be reluctant to share information and lack the resources (human and financial) to invest in extensive data gathering. Nevertheless, these owners learn and disseminate information through a variety of sources, and one that is rapidly gaining currency in all businesses is the Internet.

The present study investigates the relationship between the various theoretical perspectives in explaining the evolution and outcomes associated with inter-firm cooperation and competitive actions in the small business lodging sector as it is affected by Internet usage. Thong, Yap, and Raman (1996), Lipis, Villars, Byron, & Turner (2000), and Leonard (2000) all discuss the rising cooperation and changes in the competitive environment posed by increased technology usage. For small firms that must pick and choose their ties of all sorts, this relationship bears further investigation.

For several reasons, we chose to test these relationships in the small hotel industry in the Grand Strand region of South Carolina. As the third most popular vacation destination in the United States, this region has evolved in the last 20 years from a primarily local destination with mainly small hotels to an international destination with numerous large resort hotels and condo and time-share properties that compete with small hotels.

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