Academic journal article Journal of Supply Chain Management

Impact of Boundary-Spanning Information Technology and Position in Chain on Firm Performance

Academic journal article Journal of Supply Chain Management

Impact of Boundary-Spanning Information Technology and Position in Chain on Firm Performance

Article excerpt

INTRODUCTION

Firms have increasingly used boundary-spanning information technologies (BSIT) to support transactions with their trading partners (Stank, Crum and Arango 1999). BSIT refer to the information technologies (IT), such as electronic data interchange (EDI) and Internet-enabled electronic markets, that facilitate transactions and other partnering activities between firms in a supply chain. According to the U.S. Bureau of Economic Analysis, electronic market transactions reached US$2.94 trillion, or 13.88 percent of total transactions in 2006, as measured by the value of sales in manufacturing, wholesale and retail industries. Although extensive literature has documented that the use of BSIT results in improved performance, such as reduced shipment errors, higher inventory turnover and reduced stockouts (e.g., Srinivasan, Kekre and Mukhopadhyay 1994; Mukhopadhyay, Kekre and Kalathur 1995; Zhu and Kraemer 2002), little research has studied whether firms in different positions in the supply chain (e.g., manufacturers versus distributors) perceive these performance benefits equally or differently. The objective of this paper is to empirically study this research issue using data collected from the U.S. food industry.

It has been argued that intermediaries, such as distributors and retailers, are vulnerable to being displaced by direct sales channels. (1) This phenomenon, that is the displacement of intermediaries from supply chains, has been termed "disintermediation." El Sawy, Malhotra, Gosain and Young (1999, p. 308) have stated that the "conventional structures and strategies in the distribution industry are being torn apart by new IT-intensive business models ... mak[ing] disintermediation of existing channels a serious threat." Others have noted that intermediaries add significant costs to supply chains and that manufacturers, by investing in BSIT, can save much of these costs (Sarkar, Butler and Steinfield 1995; Giaglis, Klein and O'Keefe 2002; Rabinovich and Evers 2003). The Internet is an especially useful technology to lower costs through disintermediation, in that it allows end consumers to transact directly with manufacturers, thus bypassing traditional distributors (Bakos 2001).

Traditional intermediaries not only risk extinction due to direct manufacturer-consumer transactions, but they also face competitive threats from the rise of new types of technology-savvy intermediaries or "cybermediaries" (Sarkar et al. 1995; Giaglis et al. 2002). Using the automobile industry as an example, Bakos (1998) shows how Internet marketplaces facilitate the creation of cybermediaries that can aggregate services previously offered by traditional intermediaries. Internet-based firms, such as Auto-by-Tel, allow consumers to obtain market, price and distribution information on a large variety of automobiles, thus consolidating the (formerly) cumbersome process of searching for new or used vehicles. The rise of the cybermediary has changed the focus of the debate from intermediation versus disintermediation to include the possibility of reintermediation with technology-savvy firms displacing traditional distributors as intermediaries (Chircu and Kauffman 1999; Palvia and Vemuri 1999; Bakos 2001; Rabinovich 2004).

The advent of the Internet, the rise of cybermediaries, and the reintermediation of supply chains, all leave in question the future of traditional intermediaries. In outlining the resource-based view (RBV) of the firm, Barney (1991) stated that to build sustained competitive advantage, a firm's resources must be valuable, rare, imperfectly imitable and have no strategically equivalent substitutes. To the extent that traditional intermediaries can develop and maintain these types of resources, they should be able to achieve sustained competitive advantage. It is clear from the literature that IT resources can help intermediaries in this regard, although there is debate about whether IT resources, alone, are sufficient (Mata, Fuerst and Barney 1995; Bharadwaj 2000; Santhanam and Hartono 2003; Wade and Hulland 2004). …

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