Academic journal article Academy of Marketing Studies Journal

Marketing Supply Chain Using B2B Buy-Side E-Commerce Systems: Does Adoption Impact Financial Performance?

Academic journal article Academy of Marketing Studies Journal

Marketing Supply Chain Using B2B Buy-Side E-Commerce Systems: Does Adoption Impact Financial Performance?

Article excerpt


Research suggests that new information technologies can improve the functionality of business processes, leading to improved firm profitability. However, new technologies are not equal in their contributions to a company's bottom line. Further, there is some debate as to whether early adopters of new technology benefit over later adopters. This study examines the financial performance of firms that modify their marketing supply chain by adopting business-tobusiness (B2B) buy-side e-commerce systems. Analyses show that early adopters outperform their non-adopting industry peers in the post-adoption period. Superior performance in adopters' return on assets (ROA) is driven by increases in profit margins rather than by improved asset turnover. The results are consistent with the claim that B2B buy-side improves company performance through lower purchasing and administrative costs. Early adopters of B2B buy-side systems received a competitive advantage over industry counterparts due to greater market transparency and better transactional efficiency.

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Advances in information technologies can improve the operating efficiency and effectiveness of management information processes, thereby leading to improved firm profitability. Business-to-business (B2B) e-commerce has grown rapidly since 1997 and is believed to have fundamentally altered the economy by increasing transactional efficiency and creating more transparent markets (Chen & Siems, 2001). Currently, total B2B e-commerce has been estimated as high as $8 trillion (Roseindia, 2009). The US accounts for almost half of all ecommerce transactions worldwide, with e-commerce predicted to grow about 14% annually and at an even faster rate in Europe and developing countries (Schulman, 2008).

With mounting corporate investment in B2B e-commerce, assessment of its impact on the marketing supply chain is important. This study empirically investigates effects of adoption of B2B buy-side for operating input on early adopters' financial performance.1 Adoption of B2B technology is expected to improve company performance through improved transparency and transactional efficiency. Prior studies investigating technology investments and financial performance report mixed results, so this study will add to the research addressing this relationship.

In this study, a sample of B2B buy-side adopters is identified from B2B buy-side system vendors' news announcements and from Newswire announcements for the period January 1997 to June 2000. This period was selected because it corresponds to the initial use of B2B buy-side systems, as determined by news announcements. Our research methodology follows Kinney and Wempe (2002) that examines the impact of JIT adoption on firm financial performance. Using these B2B buy-side early adopters and industry- and size-matched control firms, we examine changes in return on assets (ROA) from pre- to post-adoption, and find the between-sample difference in ROA changes is highly significant. Similar analyses of profit margin and asset turnover components of ROA suggest that relative ROA improvement derives primarily from profit margin improvement. Further refined analysis indicates that performance improvement is driven by improvement in SG&A. The results are consistent with the hypothesis that B2B adoption improves market transparency and transactional efficiency, which leads to, improved company financial performance.

We find smaller B2B buy-side adopters obtain relatively greater profit gains than larger adopters. We hypothesize this result derives from a relatively greater financial benefit for smaller adopters from improved market transparency. This result is consistent with our supposition that vendors are more likely to compete to gain the attention of large customers due to their substantial revenue and profit opportunities. In contrast, the revenue and profit opportunities offered by smaller customers do not attract the same quantity of competition, nor result in prices as competitive as those obtained by larger firms. …

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