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Journal of Operations Management 31 (2013) 432449

Contents lists available at ScienceDirect

Journal of Operations Management


journal homepage: www.elsevier.com/locate/jom

The iron cage exposed: Institutional pressures and heterogeneity


across the healthcare supply chain
Vikram Bhakoo a , Thomas Choi b,
a
b

Department of Management & Marketing, Faculty of Business and Economics, The University of Melbourne, Victoria 3010, Australia
Arizona State University, W. P. Carey School of Business, Department of Supply Chain Management, United States

a r t i c l e

i n f o

Article history:
Available online 14 August 2013
Keywords:
Inter-organizational systems
Case studies
Institutional theory
Supply chain
Healthcare

a b s t r a c t
The healthcare industry has been known to operate in a strong institutional environment (i.e. government
regulations), and the implementation of inter-organizational systems (IOS) has followed an institutional
process. Extending this perspective across different tiers in the healthcare supply chain, we investigate
how organizations in different tiers in the supply chain (i.e. hospitals, distributors and manufacturers)
respond to institutional pressures when implementing IOS. How institutional dynamics unfold across
multiple tiers of a supply chain is an uncharted area of research, and we take the theory-building case
study approach using data collected from ten organizations. Because organizations are embedded in their
respective tiers, our within-tier analyses are equivalent to cross-organization analyses. In this regard, the
cross-case analyses occur at two different levels: at each tier level (i.e. across multiple hospitals, multiple distributors and multiple manufacturers) and across the supply chain (i.e. across all three tiers).
The study shows how different institutional pressures such as coercive, mimetic, and normative manifest
across the tiers. It also demonstrates how a differential mix of endogenous and institutional pressures
lead to mixed organizational responses across the tiers. The propositions developed from the study
enrich institutional theory arguments within the information systems and supply chain management
disciplines. They highlight how the IOS implementation dynamics within and across different tiers in a
supply chain result in heterogeneous rather than isomorphic consequences, thereby exposing the iron
cage of institutionalization.
Published by Elsevier B.V.

1. Introduction
Information systems (IS) scholars have recognized that institutional mechanisms play a key role in inuencing the adoption and
subsequent implementation of technology (Bala and Venkatesh,
2007; Son and Benbasat, 2007; Teo et al., 2003). They have
opened the doors for investigating how organizations respond to
institutional pressures and whether these pressures continue to
perpetuate isomorphism (DiMaggio and Powell, 1983) thereby
creating iron cages. In response, some scholars have started to
question the purported ubiquity of isomorphism by pointing out
how the intensity of institutional pressures varies and individual organizations have an internal technical environment that
would respond differently (Greenwood et al., 2008; Souitaris et al.,
2012). Consequently, the conversations among institutional theorists and IS scholars have converged toward acknowledging
heterogeneityorganizations adopt heterogeneous structures and
practices in response to the presence of competing institutional

Corresponding author. Tel.: +1 480 965 6135.


E-mail address: thomas.choi@asu.edu (T. Choi).
0272-6963/$ see front matter. Published by Elsevier B.V.
http://dx.doi.org/10.1016/j.jom.2013.07.016

logics within their eld (Bala and Venkatesh, 2007; Bunduchi et al.,
2008; Dacin et al., 2002).
We intend to extend this line of reasoning by empirically
examining the implementation of inter-organization systems (IOS)
across three tiers of the healthcare supply chain. The goal is to
provide a better understanding of heterogeneity. IOS provides the
technology-based infrastructure that acts as a conduit for facilitating transactions, sharing information with trading partners,
co-ordinating activities and establishing governance structures
between rms. Because IOS requires commitment from trading
partners to share resources and align processes, the issues of
relational exchanges and co-ordination have gained currency in
the IS literature (Grover and Saeed, 2007; Saeed et al., 2011).
In our study, we focus on IOS that facilitate exchange of information with trading partners such as suppliers, customers, and
distributors using the internet or other digital technologies. Examples of such systems include enterprise resource planning (ERP)
systems, bar-coding, electronic data interchange and other similar technologies (Choudhury, 1997; Saeed et al., 2011). It is
through this information exchange mechanism that organizations
are no longer saddled in iron cages (DiMaggio and Powell,
1983).

V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

We collect data from organizations that operate in the healthcare industry that face a strong institutional environment through
various regulatory agencies (Ruef and Scott, 1998). The IOS implementations in this industry have occurred largely in response to
government mandates and pressures from trading partners. These
mandates have met with varying degrees of successes and failures (Bhakoo and Chan, 2011; Blumenthal, 2011; Ford et al., 2008;
More and McGrath, 2002). Given the different types of services
provided across the supply chain and severity of consequences
associated with failures, the healthcare industry provides a unique
and challenging service operations context, particularly when
implementing IOS and investigating heterogeneous organizational
consequences (Shah, 2004; Venkatesh et al., 2011). Naturally, scholars have called for technology adoption issues to be thoroughly
investigated within the healthcare supply chain (Chopra et al.,
2004; Jarrett, 2006; Venkatesh, 2006).
We respond to this call and investigate how organizations across
a healthcare supply chain respond heterogeneously to institutional
pressures and identify organizational conditions under which IOS
implementations can be successful. Further, studying across the
three tiers in the supply chain will provide a theoretically richer
understanding of heterogeneity and the underlying reasons for it.
Scholars who subscribe to the institutional school propose that
organizations respond to demands of their external stakeholders
(i.e. government and trading partners) that promote IOS implementations in order to acquire legitimacy and goodwill within their
institutional environment (Barratt and Choi, 2007; Lai et al., 2006;
Teo et al., 2003).
To take this body of literature to the next level, we need to
address several unresolved issues that provoke a deeper understanding of institutional theory within an IOS context. First, an
institutional rationale would argue that when the catalyst for technological implementations is purely in response to the regulatory
climate and pressure from external constituents, then the organization is most likely to implement IOS largely in a ceremonial
way (Kostova and Roth, 2002; Meyer and Rowan, 1977). However, some other scholars within the institutional school argue that
institutional legitimization of practices may promote a culture of
efciency within organizations (Kennedy and Fiss, 2009; North,
1990). Therefore, we ask, if technology is implemented due to institutional pressures, then under what conditions is the organization
able to translate such changes and make a real impact on operations? Such operations are what some institutional theorists (i.e.
Meyer and Rowan, 1977) have called technical core where actual
value-adding activities occur such as actual patient care.
Second, we must note that organizations in different industries would respond differently to the institutional pressures to
implement IOS. This is largely because they have their own, unique
set of norms, business practices and administrative complexities (DiMaggio, 1991; Hoffman, 1999; Scott, 2008). Therefore, by
extension, organizations at different tiers in a supply chain may perceive institutional pressures differently. The crucial question then
becomes how an organizations internal responses to implement
IOS may vary across the supply chain. This would have implications
for the managers in organizations across the supply chain and policy makers at the government or professional organizations that set
operational standards (Ruef and Scott, 1998; Scott, 2008).
Third, IS scholars are cognizant of the fact that the decision
to implement IOS occurs in response to both, the broader institutional environment where an organization confronts external
pressures (Gosain, 2004; Teo et al., 2003) and the internal organizational environment (Bharadwaj, 2000). For instance, Teo et al.
(2003) employed institutional theory to study the inuence of
DiMaggio and Powells (1983) three institutional pressures (coercive, mimetic, and normative) on IOS adoption. Their study focused
on intentions to adopt and left open (for future research) the

433

subsequent organizational dynamics once the adoption activities


take place inside the organization. Bala and Venkatesh (2007) have
pushed this stream of research further and identied the role of
internal contingencies and institutional mechanisms in the implementation of business standards for dominant and non-dominant
rms. Our intention is to extend our understanding of these complex mechanisms (institutional dynamics and factors endogenous
to organizations) that are at play within the health informatics
domain.
We will investigate how institutional pressures and endogenous
pressures co-exist for organizations and how organizations across
different tiers of the supply chain would cope with these varied
pressures. Further, if an organization implements IOS due to institutional pressures, under what conditions would those pressures
translate into making the real changes at the technical core? This
is critical as highlighted by Devaraj and Kohli (2003) who have
strongly argued that it is the actual usage of technology that
results in an organizations performance.
In our study, we focus our attention on these unresolved theoretical issues in the literature and propose the following research
question:
How do organizations embedded within different tiers in the
supply chain respond to the presence of institutional and
endogenous pressures when implementing IOS?
In this study we conceptualize IOS implementation as the process that unfolds in the organization after the decision to adopt the
technology has been made. In this process, the organization develops new procedures, installs the technology and incites the users
to engage with the technology so as to realize the intended benets
(if any) from the technology (Cooper and Zmud, 1990; Munkvold,
1999). The responses that we seek to examine are whether organizations are responding in a purely ceremonial fashion or making
real changes thereby affecting the technical core of the organization. An examination of these responses across the tiers will
facilitate building our understanding on how heterogeneity manifests across the healthcare supply chain.
2. Literature review
We use existing literature on neo-institutional theory to help
us develop our theoretical arguments (DiMaggio and Powell,
1983; Meyer and Rowan, 1977; Zucker, 1987). We focus on
how organizations respond to the presence of organization-level
endogenous and eld-level institutional pressures within the context of IOS implementation. The isomorphism school of thought led
by DiMaggio and Powell (1983) informs us about the type of institutional pressures that impinge on organizations. Contrarily, the
institutional decoupling arguments led by Meyer and Rowan (1977)
discuss what happens inside an organization once it succumbs to
an institutional pressure and decides to respond to it. In discussing
the endogenous drivers for implementing IOS we also draw heavily
on arguments put forth by scholars in the IS discipline with a specic focus on the health informatics domain (Agarwal et al., 2010;
Chaudhry et al., 2006; Goh et al., 2011; Menachemi et al., 2007).
2.1. Institutional pressures
One of the widely accepted tenets of neo-institutional theory is
the concept of institutional isomorphism (DiMaggio and Powell,
1983; Heugens and Lander, 2009). According to DiMaggio and
Powell (1983), organizations perceive three types of institutional
pressurescoercive, mimetic, and normative. These pressures are
responsible for organizations conforming to institutional prescriptions, thereby leading to isomorphism. For instance, many

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V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

companies implemented safety programs for institutional reasons,


to gain legitimacy with the Occupational Safety and Health Administration, and their conformance eventually led them to resemble
each other (Choi and Wasti, 1995).
Coercive pressures by denition are formal or informal
pressures that originate from regulatory agencies, dominant trading partners or parent corporations on which the focal rm is
dependent (DiMaggio and Powell, 1983; Teo et al., 2003). Empirical evidence suggests that such pressures could be the result of a
government mandate. For example, within the context of technology adoption, the mandate issued by the Department of Defense
in the US to adopt radio frequency identication technology (RFID)
is an illustration of a coercive force (Barratt and Choi, 2007), as
the aftermath of the 9/11 attacks led the US government to mandate specic supply chain security measures (Williams et al., 2009).
Coercive pressures are also in play when a corporate headquarter mandates its subsidiaries to adopt a specic practice (Kostova
and Roth, 2002) or when a buying company demands total quality
management (TQM) practices from its suppliers (Choi and Eboch,
1998).
Mimetic pressures result from uncertainty, when organizations
model themselves after other organizations within their institutional eld that they consider more progressive, legitimate or
successful (DiMaggio and Powell, 1983; Haunschild and Miner,
1997). When organizations are faced with an uncertain environment they may benchmark their behavior against that of successful
organizations within their industry. This would enable them to
hedge against perceived risks and thereby acquire legitimacy (John
et al., 2001; Zsidisin et al., 2005). Within the context of technology
implementation, an organization confronts a complex and uncertain environment which encourages organizations to mimic and
benchmark themselves against their competitors (John et al., 2001).
Normative pressures are derived from professionalization.
Organizations confronted with these pressures behave in a manner
to be perceived as legitimate among their peers within their professional network (Deephouse, 1996; DiMaggio and Powell, 1983).
The sources of these pressures are typically trade associations,
accreditation agencies and professional associations, for technology adoption purposes. There is empirical evidence that these
pressures may originate through suppliers and customers in the
supply chain (Khalifa and Davison, 2006; Teo et al., 2003). Further,
when these pressures stem from trading partners in the supply
chain, they encourage organizations to conform to specic standards and within the context of IOS implementation this ensures
that information sharing is facilitated in the supply chain (Liu et al.,
2010). These pressures are diffused through hiring people within
the same industry with the requisite qualications (DiMaggio and
Powell, 1983), using similar technology (Khalifa and Davison, 2006)
or adopting socially accepted practices such as sustainability (Zhu
and Sarkis, 2007).
The response of the literature toward these institutional
pressures within the context of IOS adoption has been mixed. Studies have largely examined these pressures from the perspective of
the intention of technology adoption. For example, Teo et al. (2003)
have demonstrated that normative pressures have the strongest
inuence on the adoption of nancial electronic data interchange
(FEDI), followed by coercive and mimetic pressures. They have further illustrated that normative pressures are also the most powerful
when being generated downstream in the supply chain (i.e. from
the customers). Son and Benbasat (2007) and Liang et al. (2007)
have found coercive pressures less effective compared to normative pressures. Recently, Liu et al. (2010) argue that coercive and
normative pressures are the most effective in increasing a rms
intention to adopt electronic-supply chain management (e-SCM)
systems, with mimetic pressures being the least effective. Bala
and Venkatesh (2007) nd that all three mechanisms (coercive,

normative and mimetic) play a key role for non-dominant rms,


whereas normative pressures are most inuential for dominant
rms. Other than a few studies (i.e. Liang et al., 2007; Bala
and Venkatesh, 2007), the underlying dynamics involving these
pressures in the implementation of IOS, especially in the context
of a supply chain, have not been investigated fully in the literature.
From a theoretical perspective, more clarity is required whether
these pressures perpetuate heterogeneity or isomorphism across
the three tiers of the supply chain.
2.2. Endogenous pressures for IOS implementations
In order to develop a thorough understanding of the endogenous drivers in organizations we examine the IS discipline at a
deeper level. Given the focus on healthcare, we have sought guidance from scholars in the health informatics domain (Aron et al.,
2011; Bhattacherjee et al., 2007; Chaudhry et al., 2006).
Organizations typically seek to achieve operational efciency
and strategic benets by investing in IOS (Mukhopadhyay and
Kekre, 2002). This includes factors such as better inventory management and reducing billing and other operational errors (Aron
et al., 2011; Bakos and Treacy, 1986; Iacovou et al., 1995; Kuan
and Chau, 2001; Mukhopadhyay et al., 1995). Inter-organizational
relationships improve through better information exchange and
co-ordination among trading partners in the supply chain (Bakos
and Treacy, 1986; Frohlich and Westbrook, 2002; Zhang and
Dhaliwal, 2009). IOS facilitates organizations to develop capabilities in managing information ows, integrating complementary
technologies such as ERP systems and customer relationship management (CRM) systems (Patyakuni et al., 2006; Rai et al., 2006;
Rai and Tang, 2010). These capabilities enable internal process
alignment and leverage resources from trading partners and other
constituents so that the competitive advantage of the rm can be
enhanced (Bharadwaj et al., 2007). There is empirical evidence
that investments that facilitate information sharing also lead to
improved performance (Klein and Rai, 2009).
However, Pavlou and Sawy (2010) bring to the fore the
importance of t with the environment when considering IOS
implementation. If an organization is operating in a highly turbulent environment, it requires improvisational capabilities that
empower it to encounter storms in the environment and to deal
with unplanned and urgent contingencies for the organization to
re-congure existing resources. These capabilities are pivotal in
cultivating an ambidextrous organization. In contrast, dynamic
capabilities would be a good t for organizations operating in
moderately turbulent environments by facilitating planned spontaneity. It therefore becomes important for organizations operating
within the healthcare eld to access their environment so that they
can develop the capabilities accordingly.
In order for these capabilities to hit the technical core of the
organization and bring associated benets to the trading partners, it
is imperative that organizations have senior management support,
are technically and culturally ready and have effective standards in
place so that these IOS are suitably implemented (Liang et al., 2007;
Rai et al., 2009; Venkatesh and Bala, 2012). Implementing IOS also
require signicant investment in hardware, software and associated human capital. Therefore, the inability of an organization to
change the prescribed investment patterns and the inexibility of
processes therein may result in resource and routine rigidities and
have adverse impact on implementation of IOS in organizations
(Bala and Venkatesh, 2007; Gilbert, 2005).
Finally, scholars within the healthcare informatics domain have
highlighted safety as a signicant concern (Venkatesh et al., 2011).
IOS can help in this endeavor by improving the quality of care
administered to the patients and reducing the chances of administering the wrong medication to end patients (Khoumbati et al.,

V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

435

Fig. 1. Organizational responses to institutional and endogenous pressures.

2008; Ludwick and Doucette, 2009; Vogus et al., 2010; Yasnoff et al.,
2004).
2.3. Decoupling as organizational response to institutional
pressures
In one of the early contributions to neo-institutional theory,
Meyer and Rowan (1977) argue that when organizations adopt formal programs, policies and procedures to conform to institutional
demands, they may decouple these formal prescriptive structures
from actual practices. This decoupling occurs because, on one hand,
an organization is attempting to acquire legitimacy to meet the
demands of its institutional stakeholders but, on the other, it is
constrained by the local circumstances, access to resources and the
requisite expertise at the technical core (Boxenbaum and Jonsson,
2008). Therefore, there is a disconnection between what happens
inside the technical core of the organization and the changes that
are made, often cosmetically, at the administrative level in response
to these institutional pressures.
Scholars from different disciplines such as organization studies
(OS), operations management (OM) and IS have all addressed these
issues. The OS scholars have provided illustrations where organizations may introduce stock buyback plans or long-term incentive
plans due to institutional pressures but implement them in a
limited fashion or not at all (Westphal and Zajac, 2001). Meyer and
Rowan (1978) illustrate how schools adopt standards in response to
government regulation but decouple them from class room instruction. Similarly, Delucchi (2000) discusses the disconnect between
the claims of the mission statement and the actual baccalaureate
degrees in liberal arts colleges.
Within the OM context, examples of decoupling have been
documented across topics such as implementation of quality initiatives (Boiral, 2003; Choi and Eboch, 1998), supplier development
programs (Choi and Wasti, 1995; Rogers et al., 2007) and implementation of RFID technology (Barratt and Choi, 2007). When a
supplier implements TQM practices in response to a buyer mandate it may develop extensive documentation manuals which are
often overlooked (Boiral, 2003). Similarly, an organization adopts

RFID technology under a directive from the Department of Defense


and therefore purchases the tag but still manually applies it with
minimal integration with the internal systems (Barratt and Choi,
2007). Manual application of the tag and developing documentation represent changes at the administrative level, while the fact
that the documentation manuals are rarely consulted represents
the state of decoupling in the organization.
The IS scholars also have highlighted how users may deploy
workarounds or shadow systems which would allow them to
deviate from the prescribed rules of engagement. Therefore,
a mismatch occurs between the expectations of the technology
and its actual operationalization (Ferneley and Sobreperez, 2006;
Kobayashi et al., 2005). For example, organizations may be coerced
into adopting an ERP system that is quite inexible in their conguration. Therefore, users may then avoid using it altogether
or devise inefcient processes to circumvent the inexibility in
using the system (Boudreau and Robey, 2005; Gosain, 2004). These
workarounds could take a variety of forms ranging from an essential workaround required to complete the task to a hindrance
workaround undertaken to circumvent system procedures, formal
work ow processes and strong bureaucratic structures (Ferneley
and Sobreperez, 2006; Halbesleben et al., 2008).
Fig. 1 graphically illustrates the organizational responses to
institutional and endogenous pressures.
We have reviewed the literature on the institutional and
endogenous pressures and have explicated on the state of decoupling to reconcile the two types of pressures in organizations.
Therefore, to theoretically advance our understanding of some of
the key tenets of neo-institutional theory such as isomorphism and
decoupling, we have to ask how organizations make sense of the
presence of the institutional pressures from outside and endogenous pressures from within. Do any cosmetic changes actually
result in changes in the technical core, thereby short-circuiting the
decoupled state? Do these changes across the three tiers in the
supply chain result in heterogeneity? To address these questions,
we employ a case study approach to understand how the institutional and endogenous pressures impact the technical core and
administrative layer of the organization.

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V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

3. Methodology
By investigating how organizations in each tier in the supply chain respond to institutional and endogenous pressures, we
intend to develop an in-depth understanding of how heterogeneity unfolds across the different tiers of the supply chain. Since
the nature of the research question is exploratory and involves
investigating a contextually-rich phenomenon, we use an inductive
case study approach (Eisenhardt and Graebner, 2007; Meredith,
1998; Yin, 2003). Conducting case studies for theory building
purposes through an inductive analysis of the data has been
endorsed by scholars within the OM and IS disciplines (Barratt
et al., 2011; Benbasat et al., 1987; Meredith, 1998). Typically, an
inductive case study involves several within-case analyses and
then cross-case analysis (Miles and Huberman, 1994; Yin, 2003).
We use the same approach but with a minor variation. As organizations are nested within each tier and three tiers together
constitute a supply chain, our within-tier analyses would be what
is commonly called a cross-case analysis with organization as
the unit of analysis. We call our approach a nested case study
design and will discuss it in more detail below (see data analysis
section).
3.1. Sampling
As we investigate the effects across the supply chain and not
the effects across different supply chains, we focus on one industry
in order to minimize the extraneous effects. We chose healthcare because it is known to have a strong institutional eld (Scott,
2008). The healthcare sector is subject to strong regulation and it
is likely to have different pressures for technology implementation from inside and outside the organization (Greenhalgh et al.,
2004). We picked a three-tier supply chain. We wanted more than
a two-tier supply chain that would simply constitute a buyer and
a supplier, but did not want a very long and complex supply chain.
A well-known three-tier supply chain in healthcare would be a
manufacturerdistributorhospital supply chain. We also wanted
to control for product variance and therefore chose to focus on
pharmaceutical products as these products face a strong regulatory
environment and are sensitive to the adoption of IOS. For instance,
these products are mandated to have bar-coding for sale, both over
the counter and in retail outlets so they can be used to track products throughout the supply chain.
A variety of IOS were implemented in the case study sites but we
focused on Type 3c according to Swansons (1994) Tri Core Model of
IS innovations. These innovations are inter-organizational systems
that enable the provision of products and services by facilitating
the interface between the host organizations and trading partners
such as suppliers, distributors or customers (Grover et al., 1997;
Swanson, 1994). The data collected pertained to the IOS that have
the ability to interface with trading partners in the supply chain
such as EDI, bar-coding and ERP systems.
3.2. Data collection
The data were collected from organizations in Australia, where
the manufacturerdistributorhospital supply chain has a strong
presence. For instance, in the US this supply chain is being
challenged by many hospitals starting their own distribution centers (Scheller and Smeltzer, 2006). Data collection occurred from
February 2007 to July 2008. An initial focus group was held with
experts within the healthcare domain to provide input into the
interview protocol and identify potential organizations that could
be included for this study. The focus group helped identify organizations where a decision to adopt an IOS had been taken and the
users were in the process of developing new procedures, processes

and undertaking other modications, if any, to the new system.


After a series of communications, three manufacturers, two distributors and ve hospitals agreed to participate in this study. Table 1
provides the details of the organizations participating in the study.
The ethics clearance received stipulated that the names of the
organizations and the interviewees should remain anonymous
throughout the process. The cases were selected based on theoretical replication and to maximize learning (Eisenhardt, 1989; Stake,
1995). For example, of the ve hospitals that participated in this
study, three were based in metropolitan Melbourne and were of
larger size. The other two were smaller hospitals, one of which specialized in eye and ear ailments and the other serviced a regional
community. Among the manufacturers, two were of a similar size
with headquarters in the USA, and one was based in Australia. As
there are only a handful of distributors operating in the Australian
market, we chose the two most prominent distributors. One dealt
only with hospitals and the other supplied to hospitals as well as
retail pharmacies.
We used a semi-structured interview protocol which was tied
to institutional theory constructs and we were guided by previous
studies in the OM discipline which had used institutional theory
within their studies (Barratt and Choi, 2007). The detailed interview
protocol is available in Appendix A. Each interview lasted between
one and two hours and repeated visits were made to sites so that
all the relevant informants could be interviewed. In some cases the
same informants were interviewed multiple times. The interview
protocol was modied when interviewing personnel from different
tiers in the supply chain. Interviews were conducted with personnel that held similar designations across the tiers. For example, we
interviewed IT Managers, Directors and Deputy Directors of Pharmacy and Materials Management Departments in hospitals, Chief
Information Ofcers (CIOs), Customer Relationship Managers and
Logistics or Supply Chain Managers who worked with distributors
and Supply Chain Managers, Operations Managers, IT Managers
and Strategy Managers who worked with manufacturers. This process enabled us to strengthen the external validity of our ndings
(Yin, 2003). We continued the interview process and added more
interviews until no new themes were emerging (Eisenhardt, 1989;
Glaser and Strauss, 1967).
In addition to interview data, tours of the facilities were conducted during the visits to the case study sites. For example,
in case of hospitals one of the researchers visited the pharmacy
and materials management departments and observed how information systems that interfaced with their trading partners were
being used. Both pharmacy and material management departments were included in this study because of the overlap of
the pharmaceutical product lines between these departments.
For instance, in the case of Hospitals A and D, the researcher
observed how the staff in the pharmacy department was using
the Merlin system for procurement purposes. In the case of the
manufacturers and distributors, a visit to their facilities was undertaken. These visits were very insightful as they provided tangible
illustrations of the use of IOS. The IT Manager and Warehouse Manager typically accompanied the researcher on these visits. Field
notes were made throughout this process to triangulate observations with the interviews. We also collected documentations
through the course of our study, including internal memos and
strategy documents from manufacturers and distributors. In general, the hospitals were more reluctant to provide access to their
documents.
In order to ensure reliability of our data the drafts of the case
study reports were reviewed by the interviewees. In order to further triangulate the ndings, we also conducted interviews with
six experts who had over 15 years of experience in the industry. These included technology providers, government regulatory
agencies and third party logistics providers.

V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

437

Table 1
Overview of organization proles.
Organization type

Head quarters

Annual turnover
(world wide)

Employees
(world wide)

Types of products

Context of IOS implementation

Number of
informants

Manufacturer A

Australia

A$687 million

1600

Oncology

Manufacturer B

USA

US$20.9 billion

44,000

Intravenous
Solutions IV Fluids

Manufacturer C

USA

US$9.8 billion

47,000

Cardiovascular
Oncology
Neuroscience

Distributor A

Australia

A$3.4 billion

6000

Distributor B

Australia

A$1.3 billion

300

Pharmacy and Non


Pharmacy Products
Medical Equipment
and Pharmacy
Products

Hospital A

Australia

A$1.1 billion

13,000

Pharmaceutical
Products

Hospital B

Australia

A$700 million

8000

Pharmaceutical
Products

Hospital C

Australia

A$700 million

7000

Pharmaceutical
Products

Hospital D

Australia

A$55 million

900

Pharmaceutical
Products

Hospital E

Australia

A$110 million

600

Pharmaceutical
Products

Implementation of ERP System for


internal integration and interface with
upstream suppliers.
Implemented ERP System that
interfaced with upstream suppliers
and hospitals downstream in the
supply chain. It had also recently
implemented RFID technology.
Ongoing implementation of an ERP
system to integrate with upstream
suppliers. Also participated in the
Monash Project launched by Hospital
A and engaged in electronic messaging.
Implemented an electronic EDI system
that interfaced with hospitals.
Process of consolidating legacy
systems and implementing an EDI
system and an ERP system to transact
with hospitals.
Initiator of Monash Project to
implement bar-coding and electronic
messaging standards with trading
partners in the supply chain.
The rst hospital to implement an ERP
system in response to a state
government deadline. This ERP system
was responsible for automating the
procurement function.
This hospital had an existing electronic
EDI system that had been running
since the last ve years.
This hospital had implemented the
Med Station system that had
automated the drug dispensing to the
clinical staff in the hospital with a
functionality that could be used for
procurement purposes. Commenced
initiating a project on the similar lines
as the Monash Project.
This hospital had received a grant from
the state government to modernize its
IOS. This IOS automated the
procurement function with the
distributors and linked it internally for
inventory management purposes.

3.3. Data analysis


All the interviews conducted were transcribed verbatim and this
process yielded 1100 pages of transcripts. The interview data were
coded by the rst author based on how the constructs had been
operationalized in the literature. The key constructs of efciency,
safety, resources and internalization were derived inductively
through the data. Table 2 provides insight into how the different
coding categories were developed.
Further Tables 3b, 4b and 5b also provide representative quotes
for strong versus weak pressures for each organization in the supply chain. Both researchers worked together in interpreting the
qualitative reasoning and to reach a consensus. In some instances,
detailed discussions took place and ambiguities were resolved. We
were guided by Miles and Huberman (1994) and OM scholars who
have conducted a within and cross-case analysis for theory building
inductive studies (Mahapatra et al., 2010; Wu and Choi, 2005).
However, because we were looking across the supply chain
among multiple organizations in each tier of the supply chain,
we had to deviate from the traditional case-based theory building
approach. A typical theory-building inductive case study would formulate propositions based on cross-case analysis (e.g. Barratt and
Choi, 2007; Mahapatra et al., 2010). Because this study involves

3
4

cross-case analyses at two levels, we offer propositions in each tier


of the supply chain and then across all three tiers of the supply
chain. The cross-case analysis in the rst phase of data analysis
involves the multiple organizations in each tier of the supply chain.
The cross-case analysis in the second phase takes the cross-case
analysis of the rst phase as the within-case analysis and conducts
the cross-case analysis across the three levels of the supply chain.
Consequently, the within-case analysis and cross-case analysis were conducted across two phases. In the rst phase, the unit
of analysis is the organization. The within-organization analyses
were written up for each organization across the three tiers, and
the cross-organization analyses were conducted as the within-tier
analyses. Cross-organizational comparisons were made as withintier analyses with respect to which tier they are located in the
supply chain. This is necessary to rst identify the similarities
within the tier and further to investigate if indeed institutional
pressures to implement IOS vary across the supply chain and then
to characterize the varied responses. In doing so the unit of analysis becomes the tier. During this phase of the analysis we also
looked for patterns for institutional and endogenous pressures
and organizational responses across the tiers. The propositions we
developed through this process highlighted the zones in the supply chain that were dominated by a specic pressure. We also

438

V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

Table 2
Description of coding categories.
Description

Coding category

Instances where interviewees discussed regulatory, compliance or mandating issues as drivers for technology implementation
Instances where interviewees discussed the drivers for implementing technology in response to compliance pressures from
the parent corporation
Instances where interviewees discussed the drive for technology implementation being generated through pressure from
suppliers, customers, government etc.
Instances where interviewees discussed the role of professional bodies, trade and industry forums as drivers for technology
implementation. This was perpetuated by adoption of these standards becoming an industry norm
Instances where interviewees mentioned copying/imitating their peers or competitors in the industry as drivers for
technology implementation
Instances where interviewees mentioned issues such as reducing manual errors, improve inventory management and other
operational efciencies as drivers for implementing technology
Instances where interviewees mentioned improving nances, cash ow and improving the quality of time spent by the
physicians on their clinical tasks as drivers for implementing technology
Instances where interviewees mentioned implementing technology for quality of care and patient safety purposes
Instances where interviewees mentioned how purely ceremonial changes made due to institutional pressures had taken root
and led to real changes in the technical core of the organization
Instances where interviewees reported real changes taking place in their organization such as improvement in processes,
performance measures and strategic approaches for improving relationship with trading partners
Instances where interviewees reported making cosmetic changes in response to the institutional pressures such as creating a
new role in the organization, forming a committee, documenting procedures but not following them

Coercivepressures

identied a special condition for the short-circuiting of decoupled


states.
4. Results
As mentioned above, we rst conduct within-tier analyses
based on three cross-organization analyses, involving hospitals,
distributors, and manufacturers. In each within-tier analysis,
we address institutional pressures, endogenous pressures, and
organization responses. This is followed by cross-tier analyses where we compare patterns across the three tiers in
the supply chain. As discussed in the literature review, institutional pressures are categorized into three typescoercive,
normative, and mimetic. Organization response occurs at two
levelsadministrative level and technical-core level. The type of
factors that would function as endogenous pressures emerged
from the data. As will be discussed below, they are efciency
issues, concern for resources, patient safety and degree of
internalization.
4.1. Within tier analysis of hospitals
Hospital A is the largest among the ve based on the number of beds and satellite sites. It is the rst to initiate a project to
implement IOS. Hospital B is medium-sized and is the rst hospital
to be tapped by the state government to implement IOS. Hospital C is stable nancially, and much of its operation is in a steady
state. This hospital has taken a passive, wait-and-see approach to
IOS implementation. Hospital D is a comparatively smaller hospital specializing in eye and ear treatments. This hospital has been
quite progressive in that it had already implemented a localized
IOS that had the ability to interface with the distributors. Hospital
E is a regional hospital in a rural setting. This hospital had received
a grant from the government to modernize its IOS (Details of the
various IOS systems implemented is provided in Table 1).
For institutional pressure, we observed one strong coercive
pressure, two strong mimetic pressures, and weak normative
pressures across all hospitals (Tables 3a and 3b). The strong coercive pressure on Hospital B came from the State Government to
implement IOS (i.e. an ERP system). A hard deadline from the government loomed large on this hospital. All ve hospitals show a
weak normative pressure. They were all aware that the government
was promoting better communication in the healthcare supply
chain and they were moving toward implementing an IOS. The

Normative pressures

Mimetic pressures
Efciency
Resources
Safety
Internalization
Technical core
Administrative level

knowledge of where the government stood was becoming an


accepted norm across all hospitals. Hospital A and Hospital D show
a strong mimetic pressure. Working through a prominent consultant, Hospital A was copying the IOS implementations from the retail
sector (i.e. IT for inventory management and procurement at Coles
Myera large retail chain in Australia). Interestingly, all the other
hospitals were watching Hospital A and tried to mimic it. In the
end, only one hospital, Hospital D, became very enthusiastic about
adopting the system that Hospital A had implemented.
The data collected on endogenous pressures highlighted four
key pressures within the hospitalssafety, efciency, resources and
internalization. Hospital A and Hospital D were showing strong
endogenous pressures on both safety and efciency. When interviews were being conducted at these two hospitals with top
management (i.e. Directors and Deputy Directors) and with Procurement Ofcers, the theme of patient safety was overwhelming.
They were extremely concerned about dispensing the right drugs
and at the correct doses. This is not to say the other hospitals (Hospitals B, C, and E) were not concerned about patient safety; their
expressed concerns were just not as pronounced. Hospitals A and
D were strongly concerned about efciency issues such as reducing errors and inventory record accuracy. Hospital E was another
hospital with a strong internal pressure on efciency. This hospital, in particular, had a strong focus on inventory management and
procurement. Finally, Hospitals B, C and D also made comments
regarding how implementing IOS would help them in streamlining reporting requirements to enable staff reductions and thereby
lead to nancial savings within the departments. They also stated

Table 3a
Institutional, endogenous pressures and organizational responses by hospitals.

Hospital A
Hospital B
Hospital C
Hospital D
Hospital E

Institutional
pressure

Endogenous
pressure

Organization
response

n, M
C, n, m
n, m
n, M
n, m

S, E, I
s, e, r, i
s, e, r
S, E, r, I
s, E, i

T
A
a, t
a, T
a, T

a, weak administrative response; A, strong administrative response; c, weak coercive pressure; C, strong coercive pressure; i, weak internalization pressure; e, weak
efciency pressure; E, strong efciency pressure; n, weak normative pressure; N,
strong normative pressure; m, weak mimetic pressure; M, strong mimetic pressure;
I, strong internalization pressure; r, weak resource pressure; R, strong resource pressure; s, weak safety pressure; S, strong safety pressure; t, weak response at technical
core; and T, strong response at technical core.

V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

439

Table 3b
Illustration of coded data for hospitals.
Hospital A
Institutional

n
M

Endogenous

E
I

Organization Response

We are now becoming more conscious that the industry around us have embraced e-commerce systems particularly
the wholesalers and we have to keep up
. . .it was actually following a visit to the Coles Myer (a large Australian grocery chain) warehouse where they have an
extensive e-commerce system, that it red up our imagination to look at developing similar systems within the health
sector and we employed a consultant to have a look at our procurement and distribution systems
Our main concern with implementing technology is patient safety as we have to make sure that we have adequate
supply of the drugs and then distribute them to the wards accordingly as not having the right drug can prove fatal in
our line of business
. . .thats why e-commerce has been excellent from the point of view of monitoring our usage patterns, how much we
are purchasing and reducing manual errors. This issue is of prime importance for us
We monitor the stock that is three months from expiry, one month from expiry, and actually Ill show you some
documents. So thats our KPI internally within the pharmacy department. We have also implemented these KPIs
amongst our other satellite hospitals. And similarly we maintain that within the wards. This is signicantly more than
what is expected of us by the director of nance (actual documents as evidence were provided to the researcher)
. . .and I suppose the main thing that came out of the Phase 1 of the Monash Project was actually to do the electronic
ordering but we would also get information such as the shipping notication and by scanning the bar code on the
carton and sending the acknowledgment receipt reduced manual checking and improved our service levels in some
cases even up to 50%

Hospital B
Institutional

n
m

Endogenous

s
e
r
i

Organization Response

We were the rst hospital chosen by the state government to implement the Oracle based ERP system and given an
inexible deadline of the 2nd of May so we had to go live in order to comply and since we are publicly funded we had
no choice. . .
The key drivers, as I think you would have mentioned it, the industries around us, the supermarkets and the like and
hiring people from these industries particularly in the IT domain is also catching up
If someone came to one of our meetings tomorrow and said, this new system is up and running and we implemented
it, and by doing so has saved us a million bucks, so the very next day we would all be ringing up trying to get it
implemented, but no one has actually done that yet. . .
More or less every single product that we have is bar-coded, predominantly for patient safety, although it works very
well for procurement
And also if I have a good way of procuring drugs and if I can have the assurance that when I order a drug, its going to
come in a timely fashion, it means that I dont have to carry as much inventory
I am interested in the productivity of my staff and also ensuring that clinical staff are not wasting their time in
entering data
Of course we have KPIs (Key Performance Indicators) that we require for the auditors but I like them to be
automatically derived, and then you can use them effectively. If your measurement system is based entirely on
reporting requirements then its not a good measurement system. Weve spent quite a lot of time over the past year in
trying to build up a suite of indicators that allows us to only measure stuff that we nd useful. We are rening our
system so that we are able to collect that automatically. Were not there yet, but weve made signicant steps forward
Last year, we brought on a clinical products advisor and he evaluated all the products and then the whole process
went through a product evaluation committee and they made recommendations. However, that was a waste of time
as we are not using the (ERP) system; although we have met the government deadline. . .It has actually made us go
backwards. We are still running the department but everything is being done manually as there are lives at stake
here. . .

Hospital C
Institutional

n
m

Endogenous

Organization Response

r
a

Setting up of state tendering bodies require us to use electronic trading platforms and that is becoming more of an
accepted norm
We are waiting and watching what is going on in Hospital A and if they are able to demonstrate a saving then we will
jump on the band wagon
So I think theres a lot of reluctance in people to perhaps launch into these products until they can be shown
denitively that these products are workable, reliable, and robust and dont leave us at risk, and by us, I mean our
patients at risk
Our system continues to evolve, such that the tracking is better, the data capture is better, the analysis is better. The
range of products that we can barcode and capture now is wider. The ability for hospitals and distributors to use the
commerce as part of this arrangement is much better
I actually think a lot of it is nancial (driver for technology) as we have limited budgets
We have established two teams as a part of our response to the reporting requirements. The rst team was the
purchasing and IT team and the second team was managing the change management process. This group was
communicating to hospital managers, to divisional and clinical staff, doctors and ward staff and ward clerks about
what was going on
I guess the main thing that has come out of the EDI system has been training our inventory management staff and
technical people on how to use the system properly and how to manage the inventory system properly. They can
conrm orders, make sure that the bar coding is done accurately, and picking slips and so forth are done correctly.
This has led to small savings

Hospital D
Institutional

n
M

Society for Hospital Pharmacists of Australia (SHPA) is a professional society and they have special interest groups of
other specialties putting up guidelines for performance in specialist hospitals such as ours
We have moved over to Merlin (software system) that Hospital A was using as we believe it is an efcient way to
transact with the distributors

440

V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

Table 3b (continued )
Hospital D
Endogenous

S
E

Organization response

a
T

. . .but of course theres always the risk that youre not going to have the right product when youve got the patient on
the operating table and thats, you know, thats a major risk
To reduce the errors involved in the former manual and paper based ordering process, and these orders that in turn tie
back into our inventory controls, because through the barcode scanning of the product or the dispensing labels ties
back into the movement of stock out of our inventory
The original push for the computerization of the inventory system was a nance one, and that was driven by the
auditors. I did read the auditors report, but they felt it was a nancial control point of view and was driven by
reducing the pilferage in medicines
We have introduced a series of changes beyond what the auditors want us to doso have linked the med station to
Merlin, which is effectively linking dispensing activities to procurement and we have also entered into a vendor
managed inventory for some product lines with a distributor which has helped reducing inventory further
The nance people are always demanding paper and therefore we have employed extra people who can generate
manual documents particularly for this purpose
We have actually reduced the physical stock in the hospital by $70,000, and were working on reducing that down. So
we used to be $350,000$380,000, and were working on this year reducing it by another $30,000$40,000. Now, that
has occurred because of implementation of technology

Hospital E
Institutional

Endogenous

m
S
E

r
i

Organization response

We have to use electronic systems as the government wants us to purchase from specic suppliers who have won the
contracts
We are also looking at the option of getting in consultants who have worked in the retail sector
You have to remember that you are working with patient and you dont want to put expired stock into people,
especially prosthetics or wrong drugs or you run the risk of getting sued!
Waste elimination, error elimination. I could go on forever. Back orders and reverse logistics coming out of the system
are critical benets of using IS systems with distributors. The other thing is that it enables us to get the units of the
measure right so that you do not end up with container full of goods and you actually only want the boxes full and
vice versa
We have also been able to increase the productivity of the clinical staff that makes the senior management very happy
Of course we have to meet the requirements, but the primary reason we are doing it (using e-business systems)
particularly with functional items, to speed up the delivery time, because we need that rapid response which is really
critical in a regional community
There is a lot of duplication happening when we maintain records for the government agencies and also to conform to
reporting requirements in the hospital and this is increasing with new guidelines being set by National e-health
transition authority (NEHTA)
Since we have utilized the system, they (staff in the pharmacy department) now get a printed sheet which tells them
the numbers and the location as well as where to get it and what to pick and the correct units of measure. Therefore
by doing it electronically you eliminate people keying in data and we have decreased the inventory holding by 20%
which is signicant for us

that implementing IOS had enabled using clinical staff time (a very
expensive resource) more effectively in the hospital. These issues
were raised by the interviewees in response to senior management
seeking more transparency in budget spends across the different
departments. Finally, since this study was conducted within the
healthcare domain each organization had to comply with its internal regulatory regime along with the pressures at the eld level. We
identied a very interesting internal driver called internalization,
which essentially implied the extent to which organizations were
able to channel the regulatory pressures both externally and internally to implement technology beyond ceremonial conformity.
Hospitals A and D demonstrated strong internalization, as each of
these hospitals were monitoring their key performance measures
on a rolling basis and beyond what the internal benchmarks were
set by the senior management in the hospital. The Director of Pharmacy at Hospital A made a comment that highlighted this intrinsic
driver even though we have preferred suppliers that are endorsed
by the state contracting body we like to compare prices through on
line catalogs and develop relationships with specic manufacturers
to supply directly in order to save the hospital money. Hospital B
and E reported weak internalization as they made a fairly restrained
effort to go beyond the regulatory regime of the hospital. Hospital
B admitted that they were modifying their KPIs (Key Performance
Indicators) but there was considerable room for improvement. Similarly Hospital E also illustrated that even though they had staff
manually keying in orders, they had changed some roles to train
other staff and increase their productivity.
Organization responses occur at the administrative level and
technical core. As discussed in the literature review, institutional
pressures lead to a response at the administrative level, whereas the

internal pressures lead to a response at the technical core. Hospital


B implemented IOS (i.e. the ERP system) but in a supercial way,
which in turn had no impact on the technical core. This hospital
did enough to broadcast that they had implemented the ERP system, but the system had so many bugs, according to one manager,
it actually gone backwards. . .(and) could not use the system. As
the users were not given adequate training and the system was
not ready, this response by the hospital exemplied an essential workaround where it is imperative for the users to bypass
the system to adequately complete the required task (Ferneley and
Sobreperez, 2006). Hospitals C, D and E reported a weak administrative response. Hospital D actually created a brand new position
called the Strategic IT Manager. This manager then obtained the
required funding from top management and successfully implemented an IOS system (i.e. med station) that controls access and
dispensing of drugs and links the system for procurement purposes.
Hospital C had constituted a series of committees in response to the
institutional pressures, and Hospital E reported a change in roles
and responsibilities of staff in the pharmacy department to comply
with the government regulations.
One strong coercive pressure stands out in the case of Hospital
B. It is associated with a strong response at the administrative level.
This hospital also had weak normative and mimetic pressures. It is
interesting that two hospitals (Hospitals A and D) experience strong
mimetic pressures and at the same time show strong responses at
the technical core. As discussed above, Hospital A took the initiative to implement an IOS project and Hospital D followed closely.
The two cases where there is a strong mimetic pressure (Hospitals A and D) also exhibited a strong response at the technical
core.

V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

Hospitals A and D experienced strong endogenous pressures


thereby reporting a strong response across safety, efciency and
internalization. In fact, people driving internal pressures translated that pressure to look outwardly, searching for opportunities
to benchmark and learn. Both these hospitals also exhibited a
strong internalization pressure, as they were able to channelize
the institutional pressures to make real changes rather than simple cosmetic adjustments. The fortuitous meeting of the mimetic
institutional pressures and strong endogenous pressures helped
create a strong response at the technical core. Hospital E shows
mixed endogenous pressures (i.e. weak safety and internalization
but strong efciency pressures), and it leads to a strong response
at the technical core. Then, the pattern across these three hospitals
shows that strong efciency pressures are associated with a strong
response at the technical core. In Hospitals B and C, there were weak
endogenous pressures. There was no response at the technical core
in Hospital B and a weak response in Hospital C.
Proposition 1. Strong coercive pressure coupled with weak endogenous pressures generates strong response at the administrative level,
whereas strong mimetic pressures coupled with strong endogenous
pressures generates strong response at the technical core.

4.2. Within tier analysis of distributors


Both Distributors A and B are signicant players for pharmaceutical products within the healthcare industry. Distributor A
distributes medical equipment and pharmacy products to hospitals, retail pharmacies, and defence organizations. This distributor
had an IOS that interfaced with hospitals across all states in
Australia. Distributor B is Australias largest distributor of pharmaceutical and consumable medical products and specializes
supplying only to hospitals. This distributor had a legacy IOS that
was experiencing problems interfacing with the software systems
of some hospitals. It was also implementing an ERP system to
streamline internal operations and transact with hospitals.
In terms of institutional pressures for the distributors, both
experienced coercive and normative pressures (Tables 4a and 4b).
The mild coercive pressures that were experienced by both distributors stemmed from the government initiative to ensure that
products used in the healthcare sector take on a unique identier.
Both distributors were being slowly nudged to populate a national
product catalog for pharmaceutical products. Further, both were
experiencing normative pressures from their customers, the hospitals. Whereas for Distributor B these pressures came primarily
from the hospitals, there were additional pressures from the retail
pharmacies and from defence industries for Distributor A.
There were three types of endogenous pressuresimproving
efciency, resource allocation and internalization. As they considered it to be their source of competitive advantage, Distributor A
was particularly interested in improving efciency issues involving customer service level and meeting their performance metrics
relating to inventory management practices. In contrast, Distributor B was concerned with maximization of resource allocation in
terms of human resources, nances, and the necessary capability
for IOS implementation. In terms of internalization, Distributor A
was able to seek senior management support to channel the purely
regulatory changes initiated in the organization as a platform to
embark on several key initiatives in the organization. This resulted
in a broader portfolio of responsibilities for the IT personnel who
had typically operated in silos with minimal interaction with the
other departments. However, the recent changes resulted in their
inclusion in strategic business planning decisions and developing
relationships with trading partners and these changes were implemented on a very limited basis in the organization.

441

At Distributor A, a signicant change was taking place at the


technical core. This distributor implemented an EDI system in such
a way that it interfaced with hospitals across all states and its capability was being expanded so that it could eventually interface
with the manufacturers. This distributor had also taken over the
management of the materials management department of a large
hospital for a contract fee, thereby diversifying its business model.
At Distributor B, there was a strong administrative response, by
the hiring of a new CIO. This person was given the responsibility of
effective IOS implementation and to reduce staff redundancy.
At rst glance, the results of our analysis for the distributors
appear puzzling. First, we make a note that there is variation in
organizational responses at the administrative level. Examination
of the coercive pressures shows that they are weak at both distributors. Equally weak coercive pressures are not contributing to
the variation in the organizational response. This leads to a rather
puzzling aspect of the ndings. A strong institutional pressure is
expected to lead to a strong administrative response. However,
for these distributors, a strong normative pressure is associated
with a weak administrative response, while a weak normative pressure is associated with a strong administrative response. Therefore,
the only way the data make sense is if we correlate the normative pressures with what happened at the technical core. Then, the
directions of magnitude between variables line up.
A strong normative pressure on Distributor A appears to have
impacted on how it was implementing IOS that interfaced with its
supply chain partners. Distributor B responded to the normative
pressures by making changes at the administrative level by creating a new CIO position. This distributor, however, had a weak
normative pressure. Then, we note that Distributor A had a strong
efciency focus. The strong normative pressure was responsible for
the Customer Services Manager making a compelling case to the
CEO of the organization to get involved with the IOS project initiated by Hospital A. This participation was not purely ceremonial,
since Distributor A made signicant changes in their distribution
processes as a result of their participation in this project. This was,
however, also coupled with a minor administrative response such
as setting up a committee to respond to regulatory changes in the
sector.
Proposition 2. A strong normative institutional pressure, coupled
with a strong endogenous efciency pressure, leads to a strong response
at the technical core.
4.3. Within tier analysis of manufacturers
Manufacturer A is an Australian-based pharmaceutical company that focuses on drugs used by oncologists. At the time of
this study, it was implementing an ERP system for internal data
integration and electronic transaction with its suppliers. Manufacturer B is a US-based pharmaceutical company and is the market
leader in blood, renal, and intravenous therapy. This company
was the most progressive when it came to IOS implementation.
It had implemented an ERP system that interfaced with its suppliers upstream and hospitals downstream. It was also the rst
to use RFID technology with the scope for exchanging data with
hospitals. Among the three manufacturers, this company was most
active in delivering products directly to the hospitals without using
a distributor or a third party logistics provider. Manufacturer C
is another US-based pharmaceutical company ranked among the
ten largest pharmaceutical manufacturers in the world. It manufactures cardiovascular, neuroscience and oncology drugs and was
in the process of implementing an ERP system.
In terms of institutional pressures, all the manufacturers experienced weak coercive pressures, with Manufacturers A and C
experiencing weak and strong normative pressures respectively

442

V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

Table 4a
Institutional, endogenous pressures and organizational responses by distributors.

Distributor A
Distributor B

Institutional pressure

Endogenous pressure

Organizational response

c, N
c, n

E, r, i
e, R

a, T
A, t

a, weak administrative response; A, strong administrative response; c, weak coercive pressure; i, weak Internalization pressure; e, weak efciency pressure; E, strong efciency
pressure; n, weak normative pressure; N, strong normative pressure; r, weak resource pressure; R, strong resource pressure; t, weak response at technical core; and T, strong
response at technical core.

Table 4b
Illustration of coded data for distributors.
Distributor A
Institutional

c
N

Endogenous

r
i
Organization response

a
T

The setting up of this new regulatory agency is having an impact as the government is saying go and populate the
national product catalogue and this voice is getting stronger
All off a sudden, we are not pushing, we are the ones being pushed by our trading partners and organizations such as
the Australian Defense Force and now were being pushed into what they want rather than what we have, so there is
this sudden turnaround. . .
One of the biggest drivers for us was that we dont want people sitting there taking orders over the phone, we want
them (our customers) to navigate our system electronically, when it comes down to it, that is the single and biggest
driver. Add on to that the fact that there is an inherent error rate that comes with a team of customer service people
taking orders over the phone. You embrace electronic EDI and the problem is sorted
Smoothing our payment ows have been a big advantage
You are getting more of the business involved in IT folk rather than just IT involved with IT the personnel. So I think
that it is signicant in what is changing throughout the business
We have established a committee to monitor the progress on the NEHTA health care projects
We were actually doing that vendor supply management with two hospitals, one in Victoria and other in Tasmania
with the objective of expanding and generating signicant revenue from this exercise. . .

Distributor B
Institutional

c
n

Endogenous

e
R

Organization response

The NEHTA initiative by the central government is certainly putting pressure on us and this will intensity as they set a
date for compliance
Having electronic procurement systems are becoming standard practices in our industry and if we do not have them
in place we stand to lose customers. . .
We are looking at options to increase our order accuracy
Everyone is trying to reduce cost and make things more accurate. . . We are attempting to reduce the man hours spent
chasing products so whatever we can do to improve the supply chain and this improves our cash ow which is really
important to us
My role (CIO) is a new one that the organization has created so that we can comply with the government pressures
and also to reduce staff. . . Besides there are a number of committees that have been instituted throughout the
organization looking at IT issues
We have trailed a ward box delivery system to the hospitals with the new scanning technology that we have
implemented

(Tables 5a and 5b). The coercive pressures were the result of an


initiative at the national level wherein the manufacturers were
mandated to populate the national product catalog of medicines,
although a date for this implementation had not been nalized.
There were normative pressures for Manufacturers A and C. The
pressures came largely from the hospitals and the government.
Hospitals were pressuring the manufacturers to transact electronically with the distributors and allocate bar codes at different levels
of product packaging. The hospitals were aware that such IOS
implementations by the manufacturers would build on their improvisational capabilities and handle other unforseen events such as
product recalls (Pavlou and Sawy, 2010). The government was
also working with professional associations to develop electronic
Table 5a
Institutional, endogenous pressures and organizational responses by manufacturers.

Manufacturer A
Manufacturer B
Manufacturer C

Institutional
pressure

Endogenous
pressure

Organizational
response

c, n
c
c, N

e, R, s, i
E, r, i
e, R

t
a, T
A, t

a, weak administrative response; A, strong administrative response; c, weak coercive pressure; e, weak efciency pressure; E, strong efciency pressure; n, weak
normative pressure; N, strong normative pressure; r, weak resource pressure; R,
strong resource pressure; s, weak safety pressure; t, weak response at technical
core; T, strong response at technical core; and i, weak internalization pressure.

commerce standards for this industry. In particular, Manufacturer


C perceived a much stronger normative pressure and exhibited
urgency in its view regarding the pressure from hospitals. One manager quipped, If the health care provider wasnt asking for it, we
wouldnt even be looking at it. . .absolutely the push is 100 per cent
driven by the health care provider. Interestingly, there was no
evidence for normative pressures from the hospitals in the case
of Manufacturer B, even though its interaction with the hospitals
occurred at a much higher level when compared with the other two
manufacturers.
The manufacturers identied four types of endogenous
pressuresimproving operational efciency, resource allocation,
patient safety and internalization. In the case of Manufacturer A,
the main operational driver was improving techniques in inventory
management, although they were more concerned about resource
issues such as improving the cash ow to free up capital for research
and development. Manufacturer A also exhibited a weak internalization driver, which was categorically stated by the supply chain
manager in outlining their strategy for the future So a part of this
project (populating the national product catalog) would be to take
our learnings in the UK and US implementation as these regions
will go down this route at some stage.
Manufacturer B focused on improving operational efciency
such as providing excellent customer service, streamlining material and information ows, and reducing errors. Resource issues
did not come across as being as central. In terms of internalization,

V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

443

Table 5b
Illustration of coded data for manufacturers.
Manufacturer A
Institutional

Endogenous

n
e
R
s
i

Organization response

This is a turning point for the industry as the government is mandating that we populate the national product
catalogue
We are being pressurized by our customers i.e. hospitals to adopt e-commerce systems
For us, it is manufacturing efciency, customer service and inventory is the basic step in that principle and we are
looking at getting that down. . .
The biggest benet that an organization gets out of it is the benet of faster cash ow and working capital and that is
the biggest opportunities for the pharmaceutical sector overall
Incorrect bar coding in the grocery industry would make a customer angry whereas in our industry there is no other
recourse and it could prove fatal so you cannot let it go out into the market place
Our KPIs are rolling as far as we put something in place till it is working and then drop it and go on to the next one.
This is reviewed every quarter and if not valid as technology changes then we get rid of them
When we talk about our suppliers relationships we have halved our lead times for some global products and got the
inventories down

Manfucturer B
Institutional
Endogenous

c
E

r
i

Organization response

We have to gain compliance in the marketplace with the ongoing regulatory changes in the technology domain
Error reduction is a signicant driver if we can get the correct order with the correct prices for the correct item with
the correct unit measure and get that aligned with the system then right throughout the supply chain we are going to
get benets from that. This means we are not going to be picking the wrong stock and therefore not get a pile of
customer returns
Access to nances is an issue within our organization as our customers are reluctant to contribute to the building or
investing in a system so we have to completely rely on our deep pockets for funding any project
We are required to have a bar code on a product as we are selling our product over the counter; however we are
scanning the EAN 128 (bar code standard) on the carton even though the customers are not asking us to do that at the
moment
With all the scrutiny with anything that touches the nances we have to be extra careful so in some processes we
have added extra steps so some things that used to take two minutes now take two hours! This is particularly with
our ERP system
We are one of the only manufacturers that has implemented RFID technology internally for warehouse management
purposes and discussing how it can be applied across the broader supply chain particularly with the hospitals since
we distribute directly to them. I can also show you how we improved our KPIs (actual documents were handed to the
researcher)

Manfucturer C
Institutional

c
N

Endogenous

e
R

Organization response

Our organization (here in Australia) is under pressure from its head quarters to implement a supply chain planning
system and also the drive with the current NEHTA initiative
As more and more government puts pressure from top and customers from underneath we are having to re-think our
IT strategy but without our customers asking us for this we would have taken an even longer time. . .
In the event of a stock recall, if all of our distributors have scanned what comes in, theyve got an electronic record of
whats in and where it is, and so they can go straight to it without opening any boxes
. . .but there is also signicant costs incurred in changing over to that electronic inventory management, and at the
moment for us, from what I understand, our senior management is not really concerned about switching over and
spending the money to change the inventory management system
There is a lot of re-structuring going on and my role was created just 18 months ago because of all these regulatory
changes . . .none of our current ow of products imported or manufactured here is followed electronically. Although
we have created the documentation for some systems but we dont really follow it
We have implemented one system that interfaces between our key supplier and us and that has happened due to the
project initiated by Hospital A

this organization had implemented bar codes on cartons to improve


tracking of the products through the supply chain even though
the customer (hospital) had not asked for it. Finally, Manufacturer C experienced a strong endogenous pressure to improve
resource issues by reducing cost through implementation of IOS.
The management at Manufacturer C was particularly concerned
about several products coming off patents. This would spell discontinuation of the super normal prots that this company had
been accustomed to making. The windfall prots, while the drug
is patent protected, would typically mask the inefciencies in the
company. This was categorically stated by the supply chain manager Right now the key impediment in the implementation of any
new form of electronic trading system is that it will cost to change
over from the existing system and nobody wants to spend money
at this stage.
For Manufacturer A, there was a weak response at the technical core and none at the administrative level. It was implementing
an ERP system that interfaced with its suppliers to reduce lead
time. Manufacturer B showed a minor administrative response.
This was exemplied in the implementation of the ERP system as

extra processes were added in order to appease the regulatory


authorities. This act represented a harmless workaround as this
workaround did not sabotage the accuracy of the captured data,
although it made the process more time consuming (Lapointe and
Rivard, 2005). Since this company was a large multinational corporation, it had to make the necessary changes in its ERP system
to comply with the Sarbanes-Oxley Act. However, a more serious
response occurred at the technical core. This company made signicant changes by implementing RFID technology and the ERP
system to control inventory across the supply chain. Finally, Manufacturer C had a strong administrative response. This company
ceremoniously installed a form of electronic trading and only for a
few product lines. It also created a role of a supply chain manager
to appease the customers.
Overall, institutional pressures were causing a response at the
administrative level (see Manufacturers B and C). Manufacturer C
with strong institutional pressures was under considerable pressure to implement technology from the healthcare providers but
was ceremoniously making changes at the administrative level by
creating a new role and using technology standards for select lines

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V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

only. There was limited evidence in the cases of administrative


responses to low and medium institutional pressures.
Manufacturer B in this study was motivated by the strong operational efciency factors such as error reduction and improving
customer satisfaction. This led to a strong technological response in
terms of strategic approaches to managing inventory in hospitals,
implementation of RFID technology and streamlining information
ows with upstream and downstream trading partners. However,
for Manufacturers A and C, a strong endogenous resource pressure was leading to a weak response at the technical core which
was predominantly due to the paucity of nancial resources in the
organization.
Proposition 3. Strong efciency pressures coupled with weak institutional pressures lead to a strong response at the technical core,
whereas strong normative pressures coupled with strong resource
pressures lead to a strong response at the administrative level.
5. Cross-tier analysis
The within-tier analysis discussed in the section above looks
across various organizations within each tier of the healthcare supply chain. We now conduct our analysis across the three tiers in
the healthcare supply chain. Our goal is to capture the institutional
dynamics at the supply chain level so that we can provide a better
understanding of heterogeneity.
We rst look for patterns for institutional pressures across the
supply chain. Then we do the same for the endogenous pressures.
After that, we look at the organizational responses across the supply
chain. We address how organizations responded to the institutional pressures at the administrative level and to the endogenous
pressures at the technical core.
5.1. Institutional pressures
It is striking how prevalent the normative pressures are when
looking across the three tables under institutional pressures
(Tables 3a, 3b, 4a, 4b, 5a and 5b). The strength may vary but it
is present all across the three tiers. The mimetic pressures were
present only at the downstream of the supply chain among the
hospitals. Upstream to the hospitals, the mimetic pressures did not
occur at the distributors or the manufacturers level. In contrast, the
coercive pressures occurred mostly at the upstream to hospitals at
the distributor and manufacturers levels.
Proposition 4. The normative pressures are ubiquitous across the
supply chain, whereas the salience of the mimetic and coercive
pressures is isolated, respectively, to the downstream (hospitals) and
to the upstream (distributors and manufacturers).
5.2. Endogenous pressures
Four types of endogenous pressures have been identied in
our within-tier analysisefciency improvement, patient safety,
resource allocations and internalization. Among them, efciency,
resources pressures and internalization are most ubiquitous across
the supply chain. Although only the strong concern for resources
is conned to the upstream side of the supply chain, the strong
internalization is dominant at the downstream in the supply chain.
Similarly, not surprisingly the safety concerns occur largely at the
downstream hospital level. There is one case of a weak safety concern at Manufacturer A, but this internal pressure turned out to be
inconsequential.
Proposition 5.
The efciency, internalization and resources
pressures are present across all tiers of the supply chain but the
resource pressure is more prevalent at the upstream whereas strong

internalization and safety concerns are more prevalent at the downstream.


5.3. Organizational responses
Scanning through the organizational responses across the tiers,
we observe that in general a strong institutional pressure (e.g.
Hospital B and Manufacturer C) is associated with a strong administrative response. At the same time, weak institutional pressures
(e.g. Hospital C, Hospital E, Manufacturer A and Manufacturer B)
are associated with weak responses at the administrative level. In
terms of endogenous pressures, we observed that in all the cases
where there is a strong efciency driver as an endogenous pressure,
a strong response at the technical core occurs (e.g. Hospital A, Hospital D, Hospital E, Distributor A, and Manufacturer B). Therefore
our data support the conditions for organizational decoupling.
However, there were cases where there was a strong institutional pressure and a strong internal efciency pressure occurring
at the same time (e.g. Hospital A, Hospital D, and Distributor A).
In these cases, the internal stakeholders seemed to use the institutional pressures, particularly normative and mimetic, to their
advantage and try to drive home the changes at the technical core.
In all these cases, when a strong efciency pressure was present,
it resulted in strong changes at the technical core such as initiation of new projects with trading partners (e.g. Monash Project),
developing a more robust set of performance measures and demonstrating a tangible savings in inventory and using technology for
developing collaborative relationship with trading partners. The
changes by these organizations were so comprehensive that they
completely circumvent the strong institutional pressures. We label
this condition as the short circuiting of the decoupled state.
Proposition 6. Strong institutional pressures (normative and
mimetic) when coupled with a strong efciency pressure, generate
an internalization pressure that tends to penetrate the administrative
layer and lead to a strong response at the technical core.
6. Discussion, implications and future research
Implementation of IOS is a complex phenomenon, and the depth
of response to institutional pressures varies across different tiers in
the healthcare supply chain. The propositions developed provide
a comprehensive understanding of two intriguing issues. First,
they highlight how the combination of institutional pressures and
endogenous factors lead to differential outcomes at each tier in
the supply chain (Propositions 13). Second, the propositions also
provide a better understanding of heterogeneity in terms of which
institutional and endogenous pressures dominate a specic tier of
the supply chain and also highlight how the conuence of institutional and endogenous factors leads to differential outcomes
(Propositions 46).
Our ndings extend the work of IS scholars who have been
grappling with this complex and intriguing research problem
of understanding the interplay of endogenous and institutional
pressures when an organization implements IOS (Bala and
Venkatesh, 2007; Liang et al., 2007). We also extend the work
of scholars who have identied the key institutional factors as
antecedents of adoption (Liu et al., 2010; Teo et al., 2003) by illustrating how the contingent role of institutional pressures changes
during implementation and, specically, how the endogenous environment of the organization gains currency during the process (Bala
and Venkatesh, 2007; Rai et al., 2009).
We now provide a more comprehensive explanation of why
institutional heterogeneity has unfolded across the three tiers of
the supply chain. Our research highlights that not all three types
of institutional pressures operate the same way across the supply

V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

chain. Some are ubiquitous and some appear more isolated. The
ubiquity of normative pressures could be attributed to two reasons.
First, professional and government bodies are being proactive in
instilling norms across the supply chain in the context of IOS implementation (Bala and Venkatesh, 2007). Further, the strong network
ties that exist within this industry are accelerating the diffusion
of these norms among the players operating within the industry.
Second, the quest for acquiring legitimacy is a rather compelling
concern within the healthcare domain specically among the distributors and manufacturers that are being driven by the hospitals.
As hospitals were the bulk buyers for pharmaceutical products they
were able to exercise stronger normative pressures for the implementation of IOS projects.
This is consistent with Bala and Venkatesh (2007) who have
also identied normative pressures exerted by dominant trading
partners as playing a key role in accelerating implementation of
IOS. Resource investments by the hospitals trading partners in
such projects would indirectly enhance their process alignment
and develop capabilities regarding information sharing thereby
improving their efciency and lead to tighter relationship with the
buying rm (Rai et al., 2006; Klein and Rai, 2009; Rai and Tang,
2010).
The coercive pressures more prevalent in the upstream of the
supply chain could be due to the governments perception of the
upstream players as a bottleneck for supply chain integration. Since
the full benets of IOS can be realized through investments in such
systems beginning with the manufacturers in the upstream of the
supply chain, it is likely that governments are building regulatory
pressures for favorable implementations of IOS applications there
(Patyakuni et al., 2006; Rai and Tang, 2010).
In terms of mimetic pressures, our study found that mimicking
was more visible downstream, with public hospitals mimicking each other. This nding may appear puzzling to institutional
theorists, as institutional theory has become synonymous with
mimetic isomorphism, specically, among competing organizations (Mizruchi and Fein, 1999; Tingling and Parent, 2002). What
we found is that these hospitals tend to be non-competitive and are
open to sharing information regarding the efciencies achieved by
implementing IOS. The practice of benchmarking was quite prevalent, and this observation provides a plausible reason for mimetic
behavior among public hospitals. They benchmark or mimic the
leading players in the eld so that they could reach out to other
progressive hospitals that operate within the same environment
(Venkatesh and Bala, 2012). Because hospitals have limited experience in implementing IOS, they wanted to reach out to their peers
so that they could receive adequate training and advice to implement these systems (Fichman et al., 2011). A plausible reason why
upstream pharmaceutical manufacturers did not exhibit mimetic
behavior might be due to the secrecy and patents surrounding the
pharmaceutical industry (Shah, 2004).
Among the endogenous organizational drivers, three key factors warrant discussion so that we are able to develop cogent
understanding of heterogeneity. First, issues of resource rigidity seemed to be playing a key role in the implementation of
IOS with the upstream section of the supply chain (Bala and
Venkatesh, 2007; Gilbert, 2005). The dominance of the resource
concerns can be explained largely due to shortening of patent lives
for the pharmaceutical manufacturers (Shah, 2004) and by the
intense competition among the distributors for very slim margins.
Resource concerns, however, did not dominate the public hospitals
at the downstream end of the supply chain. The second issue that
was rather alarming was the absence of patient safety concerns
upstream in the supply chain. On the one hand, it is not surprising that our study has echoed what other IS researchers have been
suggesting as reducing medical errors is a key priority in healthcare as they are expensive, increase the length of stay of patients

445

and lead to detrimental consequences such as loss of human lives


(Aron et al., 2011; Leape and Berwick, 2005). On the other hand, it
is disconcerting that the upstream players such as manufacturers
and distributors would see this differently. One possible explanation might be that they are removed from the actual interaction
with patients and are overcome by prot maximization motives.
Finally, we found internalization to be relatively strong among the
hospitals. It was rather intriguing to observe as the hospitals were
attempting to channel the changes made at the administrative level
into a more comprehensive overhaul of IT practices in their departments. More specically, the internal pressure was most potent
when there was strong senior management support which highlights how organizations were able to go beyond decoupling if they
had a strong drive for achieving efciency. This nding supports
the work of other IS scholars who have mentioned top management support as a key ingredient to successful implementation of
IOS (Rai et al., 2009; Liang et al., 2007).
The other striking issue that came out of the endogenous
drivers was how each one of them had a different impact on the
technical core and administrative level. For example, strong efciency pressures led to responses at the technical core where as
resource issues led to responses at the administrative level. This
can be explained by the fact that efciency drivers were effective
in overcoming the organizational tendency to make purely cosmetic changes, whereas resource rigidity could work as the perfect
alibi for developing cosmetic responses at the administrative level.
These factors help explain institutional heterogeneity in our study.
Consistent with past literature, we have veried the presence
of institutional decoupling in organizations (Choi and Eboch, 1998)
and advanced the literature by identifying the more specic conditions in which decoupling becomes short-circuited. Decoupling
was present when strong institutional pressures lead to ceremonial changes in an organization (Barratt and Choi, 2007; Choi and
Eboch, 1998). We found that coercive pressures were particularly
potent when applied in conjunction with a normative pressure.
This was exemplied by the workarounds that were undertaken
by two organizations in our study. The workarounds highlight the
importance of organizational readiness when implementing IOS
(Rai et al., 2009).
6.1. Implications for theory
Our study responds to the call by scholars in the IS and OM disciplines to extend institutional theory arguments (Choi and Eboch,
1998; Gosain, 2004; Liu et al., 2010; Orlikowski and Barley, 2001;
Rogers et al., 2007). The results extend arguments within the isomorphism/heterogeneity and decoupling schools of thought within
neo-institutional theory. Our study is the rst of its kind that
systematically demonstrates the impact of institutional pressures
across the different tiers in the supply chain. In particular, it
propels the current conversations surrounding neo-institutional
theory around heterogeneity (Greenwood et al., 2008; Bunduchi
et al., 2008). We highlight that, even though organizations may
be embedded within the same institutional eld, the presence of
different pressures, both endogenous and institutional, leads organizations to respond heterogeneously and with varied intensity.
Our study therefore has taken a step toward addressing the confusion that exists within the OM context on the simultaneous
presence of institutional and endogenous pressures within a tier
and across different tiers of a supply chain. This complex interplay of institutional pressures may not lead to isomorphism, as
illustrated by the responses across the three tiers of the supply
chain.
We have also responded to calls by scholars to study institutional decoupling in complex OM contexts (Rogers et al., 2007).
Institutional decoupling is inherently a multi- level phenomenon

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V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

that requires an understanding of both the macro-institutional


pressures as well as account for an organizations individual circumstances (Tilcsik, 2010). We advance our understanding on
institutional decoupling for the implementation of IOS across the
supply chain. Understanding decoupling practices within the organizations is a challenging endeavor in itself (Westphal and Zajac,
2001), but assessing it across a supply chain adds an additional
layer of complexity. The ndings take us beyond decoupling to
highlight how mimetic and efciency pressures work in conjunction to produce strong responses at the technical core which would
certainly have intriguing implications for institutional theorists.
These pressures enabled us to identify a special condition when
the decoupled state gets short circuited. Finally, we were able to
develop a better understanding of the mechanisms of how institutional pressures work across the three tiers of the supply chain.
For instance, we indentify that strong coercive pressure if exerted
on an organization tends to generate a cosmetic response at the
administrative level.
This study also contributes to the IS scholarly community.
By diving deeper into institutional theory arguments, we have
illustrated how the underlying characteristics of IOS facilitate organizations to no longer be trapped in iron cages. We were able
to develop a better understanding of heterogeneity as an institutional outcome by studying the rationale behind implementation
of IOS across different organizations. Thus, we extend the work of
IS scholars who have employed institutional theory arguments to
study post-adoption behavior in the implementation of IOS (Bala
and Venkatesh, 2007; Liang et al., 2007).
We also extend the work of health informatics scholars by highlighting how the institutional climate and the different endogenous
factors become important when implementing IOS (Bhattacherjee
et al., 2007; Goh et al., 2011). These dynamics also vary depending
on which tier in the supply chain the organization is located. Further, we have identied efciency as a critical endogenous driver
for implementing IOS at the technical core of the organization.
This pressure is really crucial as it fuels internalization which acts
an antidote to organizational tendency to implement technology
supercially. When the adoption of IOS is internalized beyond the
institutional rationale, organizations are able to develop capabilities that facilitate process alignment, leverage investment with
trading partners and address other inertial mechanisms (Patyakuni
et al., 2006; Rai and Tang, 2010). Thus, we extend the work of
health informatics scholars who have identied error reduction
and achieving operational efciency as a key endogenous driver
in health care (Aron et al., 2011). In addition, we identify the
antecedent regulatory environment under which the workarounds
exist; for example, a strong coercive pressure would typically lead
to a workaround. By doing so we extend the work of (Ferneley and
Sobreperez, 2006; Kobayashi et al., 2005) and highlight the importance of organizational readiness (Rai et al., 2009; Venkatesh and
Bala, 2012).
Finally, we also contribute methodologically, by employing a
nested supply chain design for an inductive case study and demonstrate how the traditional approach of conducting within and cross
case analysis needs to be modied when applied in a supply chain
context.
6.2. Implications for practice
Our study also makes several practical contributions. First, as
the healthcare sector in most developed countries is undergoing
signicant reforms and experiencing strong normative and coercive pressures, the results of our study offer some parameters
for governments to consider about the wisdom of imposing these
pressures in the supply chain. For instance, a coercive pressure
by the government may be counterproductive and may result in

hospitals implementing workarounds that may have detrimental


effects on the overall quality of care offered to the patients. This
generally happens when regulations are enforced without providing adequate technical support, skills and training to the hospitals.
These pressures are ineffective if the organization is not ready or
does not have adequate infrastructure or supportive leadership.
Therefore, the government should provide adequate training support, workshops and seminars and instill condence amongst the
users before the implementation of IOS. Second, despite the strong
rhetoric on building and sustaining a safety culture in public health,
we found that upstream organizations in the supply chain (i.e. manufacturers and distributors) did not seem overly concerned about
safety issues. This nding is rather alarming, as promoting a culture of safety needs to be driven from upstream in the supply
chain. Therefore, the upstream section of the supply chain needs to
pay more attention to safety, which can then diffuse downstream
throughout the supply chain. As investments in IOS require cooperation with trading partners (Rai and Tang, 2010), it is important
that joint initiatives be launched within this domain. This is particularly important for a fragmented industry such as healthcare.
Such initiatives will ensure that all trading partners make an adequate nancial and technical investment and will be lead to fruitful
outcomes. In addition, such collaborative projects will ensure that
trading partners are willing to develop an understanding of the
drivers and bottlenecks for each organization, which will maximize
the investment returns in the long term (Patyakuni et al., 2006).
Finally, our study has implications for IT vendors. These vendors in the healthcare industry need to target and develop IOS
systems appropriately for different players across the supply chain.
For example resource issues dominated the upstream segment of
the supply chain; therefore, they need to highlight the cost saving and return on investment benets when marketing solutions
to the manufacturers and distributors, whereas safety features will
be really critical for the hospitals. In addition, the hospitals in our
study exhibited mimetic pressures. Therefore, it would be prudent
for IT vendors to provide reference of the hospitals that are using
the system and possibly include it in their marketing material as it
may alleviate the fear among the potential adopters of IOS.
6.3. Limitations of the study
There are limitations to this study. As is true of qualitative
studies that suffer from lack of external validity our study is not
an exception. The propositions developed are based on limited
number of case data. Therefore, we cannot draw overarching generalizations from the results. However, we did take some steps
to overcome this limitation by selecting a variety of organizations
within each tier in the supply chain and interviewing people with
similar designations at each tier in the supply chain. We also used
industry experts to review the data as they were being collected
and analyzed. Another limitation may come from the fact that the
key constructs (i.e. normative, coercive and mimetic pressures)
came from the literature rather than from the data. A purist would
criticize this approach as violating the spirit of grounded-theory
building approach (Chamaz, 2006; Glaser and Strauss, 1967). However, the constructs from the institutional theory were extremely
well-established and we delineated our research as one that studies these constructs in the supply chain and IS settings. And we
learned more about how these key constructs behave differently at
different tiers of a supply chain.
6.4. Implications for future research
This study intersects IS and OM disciplines and employs institutional theory arguments. There are several ways scholars from
IS and OM can take this study further. First, institutional theorists

V. Bhakoo, T. Choi / Journal of Operations Management 31 (2013) 432449

have been debating the constitution of an institutional eld and


the impact of disruptions in institutional elds due to regulatory
changes (DiMaggio and Powell, 1983; Hardy and Maguire, 2010).
The government in Australia is setting up a number of regulatory
agencies to accelerate the adoption of supply chain standards. In
our study, we observed tensions that were straining not only the
intra organizational dynamics but that these pressures were also
having an impact across organizations nestled in different tiers of
the supply chain. These regulations were changing the power structures of technology providers and professional associations. The
evolving nature of this institutional eld would be of interest to
institutional theorists and OM academics. A longitudinal case study
design would be appropriate for addressing this empirical problem.
Second, decoupling of IOS implementations has implications on
the internal perceptions of the organization as well as the image
that it is attempting to cast within its broader institutional eld. For
example, if decoupling occurs how does it affect the morale of the
employees? How do different stakeholders in the supply chain view
an organization when it ceremonially implements IOS? Perhaps
these questions can be investigated further using social identity
theory (Dutton and Dukerich, 1991; Tajfel and Turner, 1986) in
conjunction with institutional theory.
Third, IS scholars would be interested in conducting a deeper
analysis of the impact of intrinsic factors such as occupational issues, traditions and the broader organizational culture as
internal drivers that impact the implementation of technology.
Sense-making theory (Weick, 1995) would be complementary to
institutional theory. This theoretical perspective argues that cognitive understandings, norms and routines are constructed over time
through a process of interpersonal interaction. Employing sense
making theory in conjunction with institutional theory would offer
a balance can be maintained between an organizations individual
circumstances and the broader institutional environment. Finally,
another promising avenue for future research for the IS scholars
would be to tease out the issue of IT heterogeneity employing Swansons Tri Core model (Swanson, 1994) and conceptualize how its
implementation effects different institutional environments (other
than health care).
To conclude, our study has extensively engaged with institutional theory arguments to tackle several prickly issues related to
IOS implementations across different tiers of the healthcare supply chain. By employing an inductive qualitative research design,
we have demonstrated that even though organizations may be
embedded within the same institutional eld, the interaction of
both endogenous and institutional pressures results in heterogeneous rather than isomorphic consequences. Thus, we seriously
question the iron cage analogy in the digital era where organizations experience different endogenous and institutional pressures
to implement a multitude of IOS systems at their disposal. We hope
that our avenues for future research will provide IS and OM scholars
a fertile incubation ground to design studies that can build, extend
and test these ideas.

Appendix A. Interview protocol


A.1. General questions
What is your role in the organization and what responsibilities
does it include?
What is the management structure of your organization?
Where does your organization t within the Hospital Supply
Chain? Manufacturer ------- Distributor ------------ Hospital
What products/services are offered by your organization? How
many stock keeping units (SKUs) do you have?

447

What is the size of your organization (employees and annual


turnover)? How many suppliers do you have?
A.2. Perceived institutional and endogenous pressures
What IOS systems has your organization implemented in the last
two to three years?
What were the external drivers for the implementation of these
systems?
What role did the government play in these initiatives? Were you
coerced into implementing IOS within your organization?
What roles were trading partners (suppliers and customers) and
competitors playing in the adoption of IOS?
What were the principle internal drivers for implanting technology within your organization? Was it efciency concerns,
nancial aspects, senior management or issues to do with patient
safety?
A.3. Organizational responses to institutional and endogenous
pressures
What changes has your organization made in response to these
pressures?
Has your organization changed existing processes (procurement, distribution and inventory management) or embarked on
a benchmarking exercise as a result of these pressures?
How have roles and responsibilities of existing employees
changed or have new organizational structures been created as a
response to these pressures?
What kind of pressure internal/external has created a real change
in your organization?
What are the impediments in implementing these initiatives?
What additional support was required in implementing IOS
within your organization?
What were the associated risks in the implementation of IOS?
What training was provided to users in the implementation of
these technologies?
What suggestions do you have for the successful implementation
of IOS across the supply chain?
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