13 - Pattern of IT Use

Journal of Operations Management 26 (2008) 349367 www.elsevier.
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Pattern of information technology use: The impact on buyersuppler coordination and performance
Nada R. Sanders *
M.J. Neeley School of Business, Texas Christian University, TCU Box 298530, Fort Worth, TX 76129, United States Received 11 November 2006; received in revised form 28 June 2007; accepted 9 July 2007 Available online 19 July 2007
Abstract The use of information technologies between supply chain organizations has been shown to promote organizational coordination and have a positive impact on performance. Drawing from organizational theories of learning, we build on this research by proposing a model that relates the pattern of supplier use of IT to specic types of supply chain coordination activities and a comprehensive set of organizational benets. Specically, we evaluate how two patterns of IT use by suppliers (exploitation and exploration) relate to two specic types of coordination activities with their buyers (operational and strategic coordination), which in turn are posited to promote specic organizational benets. Using data from 241 rst-tier OEM suppliers in the computer industry, our ndings show that each pattern of IT use directly promotes a specic type of coordination activity. Although both types of coordination activities are needed to achieve both strategic and operational benets, we nd each coordination activity to be uniquely promoted by a specic pattern of IT use. IT use for exploitation is found to be an antecedent to operational coordination; IT use for exploration is found to be an antecedent to strategic coordination. No crossover between pattern of use and coordination activities is found. Our ndings show that to achieve a complete set of benets, suppliers must ultimately use IT for both exploration and exploitation. These ndings provide a deeper understanding of the mechanism of how the pattern of IT use can result in a comprehensive set of organizational benets for supplier rms. # 2007 Elsevier B.V. All rights reserved.
Keywords: Buyersupplier coordination; IT use; Exploration; Exploitation; Supplier performance; Supply chain management; Structural equation modeling
1. Introduction The study of organizational IT deployment has been thematic in recent literature, given the rapid growth in IT capability and use, both within organizations and between supply chain partners (Saeed et al., 2005; Ward and Zhou, 2006). The extant research has documented a positive link between overall IT capability and rm performance (Bharadwaj, 2000; Kearns and Lederer,
* Tel.: +1 614 284 3908; fax: +1 816 257 7227. E-mail addresses: n.r.sanders@tcu.edu, Nrsanders@aol.com, nadia.sanders@wright.edu. 0272-6963/$ see front matter # 2007 Elsevier B.V. All rights reserved. doi:10.1016/j.jom.2007.07.003
2003; Determirhan et al., 2007), and has found IT to have the potential of providing a signicant competitive advantage to rms (Earl, 1993; Ives and Jarvenpaa, 1991; Kathuria et al., 1999). However, numerous inconsistencies have been observed in these ndings, with many studies nding IT investments to not result in the expected performance benets (Brynjolfsson and Lorin Hitt, 2003). Researchers have suggested that these inconsistencies result from simplicity in conceptualization of key constructs and that ndings are dependent on a range of organizational factors, including the manner in which IT is used within the organizational context, measures of performance used, management practices, and organizational structure (Lim et al., 2004; Sriram
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N.R. Sanders / Journal of Operations Management 26 (2008) 349367
and Stump, 2004; Subramani, 2004). These inconsistencies reect the complexity of the problem and underscore the need for more in-depth research on the organizational impact of IT and its use within the supply chain framework. Information technology (IT) plays a critical role in supply chain management (SCM) activities (Kearns and Lederer, 2003), as it permits the sharing of large amounts of information between supply chain partners. Not surprising, studies on the overall use of IT have found it to improve inter-organizational coordination (Co et al., 1998; Small, 1999; McAfee, 2002). In turn, inter-organizational coordination has been shown to have a positive impact on select rm performance measures, such as customer service, lead-time, and production costs (Vickery et al., 2003; Stank et al., 2001). Within the eld of operations management (OM) research has primarily focused on the organizational factors impacted by IT use, such as various aspects of coordination and performance (Gailbraith, 1973; Huber, 1982; Dennis, 1996; Vickery et al., 2003; Ward and Zhou, 2006). By contrast, research within information systems (IS) has primarily focused on the manner in which IT is used within the organizational context (Subramani, 2004). Deeper insight into these relationships would be gained by combining the focus of both research streams and looking at all the constructs and their relationships at a greater level of detail. This would combine studying the manner in which IT is used within the organizational context, greater complexity of the constructs measuring interorganizational coordination, and more comprehensive measures of rm performance. The goal of this research is to provide a study that extends current knowledge on how IT use impacts buyer supplier coordination and supplier performance, from the viewpoint of supplier rms. Specically, we test a model that links the manner in which IT is used, termed intentionality or pattern of IT use (DeSanctis and Poole, 1994; Subramani, 2004), by suppliers to specic types of coordination activities with their buyers, which in turn are posited to promote specic organizational benets. Drawing from theories of learning that suggest two fundamental dimensions of organizational actions (Nelson and Winter, 1982; March, 1991), pattern of IT use is divided into two constructs, one measuring IT use for exploitation and the other for exploration. These patterns differ in the intentionality or purpose of technology use, with the former using IT to improve current methods of problem solving, while the latter uses IT to uncover new methods of problem solving. As such these patterns of use are complementary to one another
and, according to theory set forth by March (1991), both types of actions are ultimately important for long-run organizational survival. Buyersupplier coordination, as perceived by the supplier, is measured at two levels. The rst measures coordination at the operational level and the second at the strategic level. Finally, organizational performance is measured using a broad set of benets, which include both operational and strategic performance measures, measured from the viewpoint of supplier rms. As such, this study provides a more thorough analysis of the impact of IT use on buyersupplier coordination and on organizational performance, as perceived by the supplier (Barua et al., 1995; Mukhopadyay and Kerke, 2002; Subramani, 2004). The relationships tested by the proposed model and the constructs used are directly derived from the literature. Our study differs from previous research in a number of important ways. First, unlike the majority of past studies that focus on benets of IT use to buying rms, our study focuses on benets to suppliers of OEM rms, as perceived by the supplier. The decision to invest in information technologies is particularly important for supplier rms that are typically disproportionately smaller in size compared to their buyers and must appropriate larger portions of their budgets to develop a technological capability (Benton and Maloni, 2005; Subramani and Venkatraman, 2003; Lee, 2004). In fact, a study by Angeles and Nath found buying rms to be signicantly larger than supplier rms both in terms of net sales and the number of employees (Angeles and Nath, 2001). Some studies even suggest that the benets of IT that accrue to buyers may elude suppliers for these reasons (Carter, 1990; Clemons and Row, 1992). Indeed, Maloni and Benton (2000) showed that an imbalance of power exists between buyers and suppliers, in favor of buyers, suggesting that suppliers may be under greater pressure to adopt technologies and processes of their primary buyer. Supporting this argument, Saeed et al. (2005) make a distinction between rms that initiate the use of inter-organizational IT (typically buying rms) and rms that participate in its use (typically suppliers), and provide support for the former being primary beneciaries of such IT systems. Further, Lee (2004) underscores the nancial difculties of supplier rms to raise capital for technologies compared with buyers, due to their smaller size. Therefore, greater understanding of the benets that these technologies provide to supplier rms is an issue of interest to both managers and researchers. Second, unlike past studies that primarily focus on nancial performance measures, market share measures,
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or a narrow range of operational performance measures, our study measures a more comprehensive set of benets. Strategic and operational benets together are considered to comprise a set of rst-order organizational benets, which in turn are expected to impact second-order benets for the rm (Mukhopadyay and Kerke, 2002; Melville et al., 2004). Operational benets are a result of the lowering of transaction and production costs derived from the use of an inter-organizational IT, and include more efcient inventory management, automated billing and payment settlement, and automated business processes. They include process improvement, cost efciencies, and improved customer service. Strategic benets are a result of a stronger relationship with customers, and include knowledge of customer-driven product features and enhancements, and increased sales volume. First-order operational and strategic benets, in turn, are posited to generate second-order benets for the rm, which occur over the long run, and include measures such as improved nancial performance and market share (Mukhopadyay and Kerke, 2002; Subramani, 2004). Unlike past studies, our study looks at a broad set of rstorder benets and, as such, provides a more comprehensive evaluation of supplier performance. Third, unlike the majority of past studies that focus on benets of general IT use and its impact on coordination as a whole (Stank et al., 2001; Sanders and Premus, 2005), our study focuses on the pattern of IT use and an evaluation of how different patterns impact different types of coordination activities. As such, this analysis provides a richer and much needed understanding of the impact of IT on buyersupplier coordination, as perceived by suppliers. Using data from 241 rst-tier OEM suppliers in the computer industry, our ndings show that each pattern of IT use directly promotes a specic type of coordination activity. Although results show that both types of coordination activities are needed to achieve both strategic and operational benets, we nd each coordination activity to be uniquely promoted by a specic pattern of IT use. IT use for exploitation is found to be an antecedent to operational coordination; IT use for exploration is found to be an antecedent to strategic coordination. No crossover between pattern of use and coordination activities is found. Our ndings show that to achieve both types of benets, suppliers must ultimately use IT for both exploration and exploitation. These ndings provide support for the theory set forth by March (1991) as it pertains to the organizational use of IT, and provide a deeper understanding of the mechanism of how the pattern of IT use can result in a broad set of organizational benets for supplier rms.
2. Literature review 2.1. Patterns of IT use A review of the IT literature reveals mixed results with respect to organizational outcomes achieved from IT use (Dos Santos and Sussman, 2000; Sriram and Stump, 2004; Subramani, 2004). These mixed results have even been dubbed the productivity paradox to denote the inconsistencies observed in ndings (Brynjolfsson and Lorin Hitt, 2003). One suspected reason for these inconsistencies may be the broad range of objectives expected from the implementation and use of IT in organizations (Lim et al., 2004; Sriram and Stump, 2004; Dos Santos and Sussman, 2000; Stratopoulos and Dehning, 2000). These objectives range from narrow operational improvements, such as reducing specic operational costs or improving customer service, to broad strategic benets, such as gaining a competitive advantage (El Sawy et al., 1999; Premkumar et al., 1997). Other explanatory variables that have been identied as possible causes of the incongruence in ndings include breadth, depth, scope, and intensity of IT use (Bensaou and Venkatraman, 1995; Massetti and Zmud, 1996). Albeit descriptive, these dimensions fail to provide a direct linkage between IT use and variations in organizational outcomes. Another possible reason for the incongruence in ndings of past studies is that the use of IT in different contexts is typically motivated by differences in objectives, hence the intentionality or purpose of use is different. These differing objectives are manifested in the way IT is used (DeSanctis and Poole, 1994), with recent research suggesting that indeed it may be the pattern of IT use that is a contributor to differing outcomes (Subramani, 2004). Differences in the pattern of IT use, also known as the concept of appropriation, have been shown to lead to different outcomes, irrespective of similarity of context or technology used. Appropriation, or pattern of use, is a result of intentionality, purpose, or motivation, and as such could also be useful in relating IT use to organizational outcomes. For example, in a study by DeSanctis and Poole (1994) differences in appropriation were found to lead to differences in decision processes and outcomes, when tested in small group meetings using group decision support systems (GDSS). To explicate the construct of appropriation we draw from learning theory, which categorizes organizational actions as either those for exploitation or exploration (March, 1991). Exploitation involves actions that rene old and established patterns. This would include
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improving operational efciency through measures such as increasing standardization or tightening process control. Exploration, on the other hand, involves actions that establish new patterns or use old patterns in different ways to bring value to the organization. Exploitation involves improving current methods to solve problems, whereas exploration involves uncovering new methods to solve problems. Exploitation involves a focus on efciency, consistency and process control, whereas exploration involves risk taking and experimentation. Exploitation is dened by terms such as search, innovation, and discovery, with benets occurring over a longer time horizon. On the other hand, exploitation is dened by terms such as renement, implementation and execution, with benets occurring over a more immediate time period. Further, exploitation has a more localized impact, whereas the impact of exploration diffuses beyond the organization. Debenham and Wilkinson (2006) offer a clear distinction between the two categories of organizational activities stating the following: Strategies focusing on the same products in the same markets are examples of exploitation strategies. All the rest involve some form of exploration, be that new means of serving existing markets, new markets for existing products or new products and market combinations. These differences are further summarized in Table 1. Applied to the use of IT in organizations, exploitation and exploration reect two complementary patterns of IT use. These patterns are aligned with the distinction between automating and informating, the two broad motives for using information systems offered by the literature in information systems (DeSanctis and Poole, 1994; Venkatraman, 1994; McNurlin and Sprague, 2002). Theories of information systems hold that information systems within organizations can on the one hand serve to automate organizational tasks, such as automating billing, report preparation, inventory management, and nancial analysis. Automating tasks focuses on efciency and is aligned with the organizational action of exploitation. By contrast, information systems can serve to informate, provid-
ing information to support organizational decisionmaking and exchange of ideas, a concept aligned with exploration. A study by Subramani (2004) looked at the pattern of IT within the context of inter-organizational IT use, albeit in limited form. The study looked at the impact of pattern of IT use on organizational outcomes and supplier performance, with results providing support that pattern of use indeed leads to differences in outcomes. However, the Subramani (2004) study was restricted to suppliers of only one retailer, thus limiting the generalizability of the ndings. A more comprehensive study of the impact of patterns of IT use on performance is warranted to elaborate on these initial and limited ndings, and provide broader support. 2.2. IT and organizational coordination The improvements in coordination among supply chain partners through the use of IT are well documented (Frohlich, 2002; Balakrishnan and Geunes, 2004). The use of IT has permitted strong customer and supplier coordination for inventory planning, demand forecasting, order scheduling, and customer relationship management (Feeny, 2001). A number of past studies have evaluated the relationship between IT use and organizational coordination. Burgess (1998) was one of the rst to identify IT as a critical component of logistics strategy, noting that IT can provide integration between supply chain rms and, as a result, can improve customer service and lower costs. A study by Stoeken (2000) showed that IT has a direct impact on coordination and leads to supply chain innovation. Vickery et al. (2003) further showed a direct link between integrative information technologies and supply chain coordination for supplier rms in the auto industry. Other comparable studies focused on the benets of EDI and showed that it provides benets to companies by providing speed of information ow and fostering value-added partnerships between supply chain organizations (Holland et al., 1992; Scheomber, 1992; Ragatz et al., 1997).
Table 1 Dening characteristics of exploitation and exploration in organizational learning Exploitation Description Expected value Variability of returns Timing of returns Distribution of returns Renement of old patterns Efciency of current system Predictable and more certain Short-run Spatial proximityindividual knowledge Exploration Experimentation with new patterns New ideas; distinctive competency Variable and less certain Long-run Diffused through external network-collective knowledge
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Transaction cost economics has been used as an argument that IT use promotes supply chain coordination. The essence of transaction cost theory is that the type of relationship conguration adopted depends primarily on cost considerations (Coase, 1937; Williamson, 1975; Stoeken, 2000). As rms source inputs from other rms they incur transaction costs, which may be related to costs that include exploring the marketplace and identifying alternatives. At one extreme, if these costs become too high, it may be appropriate for rms to resort to self-production or vertical integration. Different types of relationships create varying information processing requirements. Even in the context of longterm relationships transaction costs exist, typically in the form of the continuous need for adaptation and evaluation. There is agreement among researchers on the role of IT use between rms in reducing coordination costs and transaction risk (Malone et al., 1987; Clemons and Row, 1992; Clemons et al., 1993). Although there is some disagreement on the ultimate impact of this on organizational relationships (Saeed et al., 2005), a large body of research supports the notion that the outcome is a more integrated buyersupplier relationship (Nooteboom, 1992; Hess and Kemerer, 1994; Holland and Locket, 1997; Kambil et al., 1999). Within the eld of operations management (OM) research on the impact of IT use on coordination has evolved from the study of overall buyersupplier coordination (Vickery et al., 2003) to specic areas of coordination, ranging from the role of IT on lean/JIT integration (Ward and Zhou, 2006) to the impact on joint decision-making process time (Gailbraith, 1973; Huber, 1982; Dennis, 1996). By contrast, research within information systems (IS) has focused more on the actual use of IT, including the role of organizational culture on IT use and performance (Livari and Huisman, 2007) and the pattern of IT use (Subramani, 2004). In fact, Ward and Zhou (2006) note that the IT literature views the relationship between IT and performance as a black box, focusing solely on the relationship between IT use and performance and ignoring the variables that mediate the effect. Given the strengths of both research streams, it makes sense to combine them, one being the focus on the actual use of IT and the other looking at specic aspects of coordination impacted by its use. 2.3. Organizational coordination and rm performance Supply chain management takes a systems view regarding all activities and functions that are needed to bring a product or service to market. This view recognizes
that the value creation process extends beyond the boundaries of the rm, and involves integrated business processes among entities of the chain, such as suppliers, manufacturers, and customers (Stevens, 1989; Tan et al., 1998). The theoretical foundation for this view can be traced back to Porters value chain model (Porter, 1980, 1985) that advocates exploitation of linkages within a rms value chain and between the value chains of its suppliers and customers. Exploitation of these linkages is expected to lead to superior performance (e.g. Tan et al., 1998; Frohlich and Westbrook, 2001; Vickery et al., 2003) and promulgates the idea that individual organizations that comprise the supply chain must ultimately be managed as a single entity or one complete system. Achieving this requires integration, collaboration, and coordination across individual rm functions and throughout the supply chain. Research consistently supports the idea that integration between rms improves rm performance (Stevens, 1989; Lee et al., 1997; Metters, 1997; Narasimhan and Jayaram, 1998; Lummus et al., 1998; Anderson and Katz, 1998; Hines et al., 1998; Johnson, 1999; Frohlich and Westbrook, 2001; Vickery et al., 2003; Ward and Zhou, 2006). Problems of nonintegration between rms have been well documented beginning with Forresters (1961) seminal work (Lee and Billington, 1992; Hammel and Kopczak, 1993; Frohlich and Westbrook, 2001). Lack of coordination has been shown to create the classic magnication of demand up the supply chain, know as the bullwhip effect, resulting in alternating excess inventory and stock-outs (Metters, 1997). Having an integrated supply chain has been shown to provide a signicant competitive advantage relative to both price and delivery (Lee and Billington, 1992). The performance benets of coordination can also be seen in practice, with todays most successful manufacturers having tight coordination with their supply chain partners, enabling real-time information sharing and well coordinated movement of inventories. The result are products that are delivered quickly and reliably when and where they are needed, high responsiveness to short lead times, the elimination of the bullwhip effect, and improved rm performance (Lee et al., 1997). For example, the collaborative relationship between Sears and Michelin using CPFR, has resulted in a 25% reduction in inventories for both companies (Steerman, 2003). Similarly, General Motors collaborative relationship with its suppliers has reduced vehicle development cycle times from 4 years to 18 months (Gutman, 2003). In the academic literature, buyersupplier coordination and its impact on rm performance has been
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studied as either a single construct (Vickery et al., 2003), multiple constructs measuring different levels of coordination, such as internal and external coordination (Koufteros et al., 2005; Sanders and Premus, 2005) or constructs focused on specic coordination tasks. These include coordination within lean/JIT practices (Pyke and Cohen, 1990; Braun and Mefford, 2004; Ward and Zhou, 2006), buyersupplier coordination in new product development (Swink et al., 1996; Hartley et al., 1997; Petersen et al., 2003), and coordination as a source of leverage and process efciency (Saeed et al., 2005). Collectively these studies provide greater insight into coordination, underscore its complexity, and suggest that coordination warrants continued study. Numerous untested views of buyersupplier coordination still remain, such as coordination at different organizational levels, including strategic versus operational, and coordination for different organizational tasks. Although research consistently shows that integration improves rm performance, most of these studies have focused on integration from the viewpoint of the buying rm and consider its impact on a narrow range of performance measures, such as inventory turnover, customer service, or cost reductions. More comprehensive work on organizational benets suggests a model where information technologies are viewed as creating direct, rst-order benets, which in turn can generate indirect, second-order benets (Barua et al., 1995; Mukhopadyay and Kerke, 2002). First-order benets are those that are a direct result of the rms actions and can be inuenced directly by the rm, and include variables such as cost reductions, inventory turns, and customer service measures. On the other hand, second-
order benets are competitive outcomes that are inuenced by external factors such as competition and environmental changes, and include variables such as market share and protability. Studies have not yet looked at the impact of buyersupplier coordination on a broader set of rst-order benets, including both operational and strategic benets, particularly from the viewpoint of the supplier. Such evidence would provide a more comprehensive perspective of the impact of coordination on rm performance. 3. Research hypotheses Based on conclusions from the extant literature we propose a model, shown in Fig. 1, of the relationships between pattern of IT use, organizational coordination, and organizational benets. Two constructs are used for pattern of IT use: IT use for exploitation (F1) and IT use for exploration (F2). As specied by Subramani (2004), based on theory of organizational learning March (1991), we dene IT use for exploitation as the use of IT for the execution of structured interrm processes. Similarly, we dene IT use for exploration as the execution of unstructured interrm processes. Organizational coordination is measured by two constructs: operational coordination (F3) and strategic coordination (F4). We use the denition of supply chain coordination as information sharing between supply chain partners to achieve joint benets (Chopra and Meindl, 2007). Operational coordination is dened as information sharing to achieve efcient task execution (Subramani and Venkatraman, 2003; Subramani, 2004). Strategic coordination is dened as information sharing
Fig. 1. Research model linking IT use, organizational coordination, and supplier benets.
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for purposes of organizational planning and positioning strategies (Subramani and Venkatraman, 2003; Subramani, 2004). The last set of constructs measure organizational benets. We use a complete set of rst-order benets, including both operational and strategic benets, for a more comprehensive analysis (Barua et al., 1995; Mukhopadyay and Kerke, 2002). Operational benets are dened as rst-order benets that arise directly from lowered transaction and production costs (Mukhopadyay and Kerke, 2002; Subramani, 2004). For example, the use of IT in SC organizations lowers transaction and production costs, such as automated invoicing and inventory tracking, and directly results in operational benets. Strategic benets, on the other hand, are dened as strategic benets that arise through rms positioning themselves to take advantage of opportunities arising from the SC relationship (Mukhopadyay and Kerke, 2002; Subramani, 2004). For example, the development of a new product or the ability to correctly respond to changes in the relationship is a strategic benet (Mukhopadyay and Kerke, 2002). We propose that the two patterns of IT use each have a positive impact on operational and strategic coordination, as perceived by supplier rms. The relationship between IT use, in the broader sense, and supply chain coordination has been examined in past studies (Vickery et al., 2003; Subramani, 2004; Raghunathan, 1999). Studies have also tested the relationship between IT use and other constructs that are related to coordination (Gaski, 1984; Mohr and Nevin, 1990), such as relationship commitment (Kent and Mentzer, 2003) and relationship magnitude (Golicic and Mentzer, 2006). Further, the use of EDI has been shown to have a positive impact on SC collaboration (Holland et al., 1992; Ragatz et al., 1997; Scheomber, 1992). In addition, researchers have demonstrated that IT use can decrease coordination costs (Clemons and Row, 1992; Clemons et al., 1993), expected to bring about increased coordination (Vickery et al., 2003). Engaging in exploitation means involvement in activities that focus on production and efciency of tasks, activities that are a part of operational coordination as dened in this study. By contrast, engaging in exploration means involvement in activities that focus on search and experimentation, activities that are a part of strategic coordination as dened in this study. Further, the limited research on how pattern of IT use affects SC relationships nds that differing patterns have a differential impact on buyersupplier interactions (Subramani, 2004). Although the study by Subramani (2004) focused on the alignment of business
processes between buyer and supplier rather than coordination per se, the ndings suggest that both patterns of IT use should have a positive impact on coordination. Collectively this supports the development of our rst set of hypotheses: H1: The higher the level of IT use for exploitation (IT1) the greater the suppliers perceived level of operational coordination (OC) in the exchange. H2: The higher the level of IT use for exploration (IT2) the greater the suppliers perceived level of strategic coordination (SC) in the exchange. H3: The higher the level of IT use for exploitation (IT1) the greater the suppliers perceived level of strategic coordination (SC) in the exchange. H4: The higher the level of IT use for exploration (IT2) the greater the suppliers perceived level of operational coordination (OC) in the exchange. We further propose that operational and strategic coordination each have a direct impact on both strategic and operational supplier benets. Higher levels of both types of coordination are expected to contribute to improved organizational performance. Vickery et al. (2003) provide empirical support for the link between SC integration and customer service performance. Their study nds a signicant impact of supply chain integration on elements of customer service performance for rms in the auto industry. Similarly, Stank et al. (2001) nd coordination, an element of integration, to positively impact rm performance. This leads us to our next set of hypotheses: H5: Operational coordination (OC) has a direct and positive impact on suppliers operational benets (OB). H6: Strategic coordination (SC) has a direct and positive impact on suppliers strategic benets (SB). H7: Operational coordination (OC) has a direct and positive impact on suppliers strategic benets (SB). H8: Strategic coordination (SC) has a direct and positive impact on suppliers operational benets (OB). 4. Methodology 4.1. The sampling procedure The research methodology used is based on empirical data collected through a questionnaire survey
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N.R. Sanders / Journal of Operations Management 26 (2008) 349367 Table 2 Frequency distribution of sales and number of employees Annual sales (US$ million) Number of rms Percentage 32.0 28.6 18.3 15.3 5.8 100 Percentage 26.6 28.2 21.6 8.3 11.6 3.7 100
of rst-tier suppliers to OEM rms in the electronic computer industry (SIC 357). We wanted to focus on one industry to eliminate confounding of results. Most studies of this type have been conducted in the auto industry (Droge et al., 2004; Maloni and Benton, 2000; Vickery et al., 2003), which primarily relies on EDI as a means of communication between supply chain rms (Lewis and Talalayevsky, 1997; Van Joek et al., 1998). We deliberately chose the electronic computer industry as its members are rms that pioneer the development of information technology. As recently noted, the operations from this industry are likely to be prototypical of future operations (Beckman and Sinha, 2005). The industry is dominated by well-known corporations, including IBM, HewlettPackard (HP), Sun Microsystems, Fujitsu, Toshiba, Dell, and Xerox. As such, we expect the use of IT to be widespread in this industry. The survey instrument was initially pre-tested by four executives and ve academics, for content, readability, and ambiguity (Dillman, 2000). Based on results of the pretest, minor changes were made to select questionnaire items, and the instrument was mailed to 1000 U.S. rsttier OEM suppliers. We targeted the survey to CEOs as they would be most likely to have the required knowledge. This is supported by a study by Phillips (1981) that indicates that high ranking informants tend to be more reliable sources of information than low ranking. Rather than subjectively developing the sample frame, the contact information used to develop the database was purchased from Wholesale Lists, an online company specializing in business databases, with the SIC code and other criteria specied when purchasing the list. The study was conducted in the spring of 2004. In order to ensure an adequate response rate a variation of Dillmans total design method was used in the survey process (Dillman, 2000). The initial mailing included a cover letter and the survey instrument, with the latter designed to be merely folded and returned, with postage pre-paid. Reminder postcards were sent approximately ten days following the initial mailing, followed by a second survey mailing approximately thirty days later. Those that had already responded were told to ignore the mailing. Fourteen incomplete responses were discarded. The mailings yielded 241 usable responses, for a response rate of 24.1%, in line with past surveys of this type. Specic demographic information of the responding rms is shown in Table 2. Table 3 shows the distribution of survey respondents. In fact, over 90% of the respondents are at a Vice President level or higher, with the typical respondent holding the title of President, CEO, Senior Vice President, Vice President, or Director.
(A) Frequency distribution of annual sales 1249.99 77 250499.99 69 500999.99 44 10001499.99 37 1500 and above 14 241 Number of employees Number of rms
(B) Frequency distribution of number of employees 1999 64 10001999 68 20002999 52 30003999 20 40004999 28 5000 and above 9 241
4.2. Tests for non-response and common method bias The adequacy of the response sample is a concern any time a survey methodology is used. An important part of ensuring adequacy is to test for non-response bias. To test for non-response bias chi-square differences were calculated between respondents and non-respondents for annual sales revenues (x2 = 4.23, p > 0.05) and number of employees (x2 = 5.75, p > 0.05), and found to be insignicant. The sent surveys were not anonymous, permitting the identication of respondents and nonrespondents. These results collectively suggest that nonresponse bias is not present in the data (Sabherwal, 1999; Teo and King, 1997). Common method bias is another potential problem in survey research (Flynn et al., 1990). To test for common method bias Harmons one-factor test was used (Podsakoff and Organ, 1986; McFarlin and Sweeney, 1992). The rationale for this test is that if common method variance poses a problem to the data, a single
Table 3 Prole of survey respondents Respondent title 1. 2. 3. 4. 5. 6. President CEO Senior Vice President Vice President Director Other Frequency 11 25 97 87 17 4 241 Percentage 4.6 10.4 40.2 36.0 7.1 1.7 100
Total
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latent factor will account for all or most of the manifest variables. Five factors with eigenvalues greater than one were extracted and accounted for a total of 63% of the variance. The rst factor accounted for 17% of the variance. Therefore, a single factor did not emerge and one factor did not account for most of the variance, suggesting that common method bias is not a problem. 4.3. Construct measures Table 4 shows the model factors and the multiple variables used to measure each factor. All the scale items used for each factor are directly derived from past studies and are based on a seven point Likert type scale. For Factors 1 and 2 the scale is anchored by 1 = no use and 7 = signicant use. For Factors 3 and 4 the
Table 4 Standardized coefcient values Factors and scale items
anchors are 1 = not involved and 7 = signicantly involved. Finally, for Factors 5 and 6 the anchors are 1 = none and 7 = high level. The development of the scale items is described in this section. Factors 1 and 2 measure supplier use of IT for both exploitation (IT1) and exploration (IT2). The three scale items for Factor 1 measure the extent to which the supplier uses IT for the following purposes to communicate with their primary buyer: order processing, invoicing and settling accounts; exchange of shipment and delivery information; managing warehouse stock and inventories. The three scale items address aspects of using IT to improve current processes, the denition of IT use for exploitation. Similarly, three scale items are used to measure Factor 2. They measure the extent to which the supplier uses IT
Standardized coefcient
Standard error
t-Value
F1: IT use for exploitation (IT1): a = 0.812 (please indicate the extent to which you use IT to communicate with your primary buyer for the following:)a IT1-1: Order processing, invoicing and settling accounts 0.621 0.028 12.14* IT1-2: Exchange of shipment and delivery information 0.611 0.031 11.47* IT1-3: Managing warehouse stock and inventories 0.673 0.033 11.46* F2: IT use for exploration (IT2): a = 0.798 (please indicate the extent to which you use IT to communicate with your primary buyer for the following:)a IT2-1: Understanding trends in sales and customer preferences 0.578 0.027 12.12* IT2-2: Integrating your design and manufacturing functions 0.634 0.023 12.42* IT2-3: Leveraging your rms expertise to create new business opportunities 0.598 0.027 11.56* F3: Operational coordination (OC): a = 0.811 (please indicate the extent of involvement of your rm in the following activities with your primary buyer:) b OC1: Sharing operational information 0.451 0.023 16.17* OC2: Coordination of production planning 0.532 0.026 16.24* OC3: Utilization of integrated database for information sharing 0.429 0.028 16.05* F4: Strategic coordination (SC): a = 0.723 (please indicate the extent of involvement of your rm in the following activities with your primary buyer:) b SC1: Strategic planning with buyer 0.534 0.031 15.72* SC2: Planning for new products and programs with buyer 0.528 0.029 15.98* SC3: Planning for product conception and design with buyer 0.467 0.025 16.12* F5: Operational benets (OB): a = 0.762 (please indicate the extent to which you are receiving the following benets as a result of your relationship with your primary buyer:)c OB1: Cost efciencies from higher sales volumes 0.714 0.025 12.26* OB2: Improvements to current processes or creation of new processes 0.623 0.021 13.35* OB3: Improved protability 0.615 0.033 12.11* F6: Strategic benets (SB): a = 0.842 (please indicate the extent to which you are receiving the following benets as a result of your relationship with your primary buyer:) c SB1: Learning about customers and markets for new products 0.743 0.034 14.36* SB2: Creation of new products, product enhancements 0.724 0.039 14.71* SB3: Development of new business opportunities 0.676 0.051 15.22*
a b c *
Scale. No use some use signicant use (17). Scale. Not involved moderately involved signicantly involved (17 scale). Scale. None of this benet some level of benet high level of benet (17 scale). Signicance at the p 0.01 level.
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to communicate with their primary buyer for the following purposes: understanding trends in sales and customer preferences; integrating design and manufacturing functions; leveraging the rms expertise to create new business opportunities. These scale items address the aspects of using IT to develop novel solutions to problems, the denition of IT use for exploration. The scale items used for both Factors 1 and 2 are those developed by Subramani (2004), the only study we are aware of that develops scale items to measure these constructs, although the IT literature has discussed their conceptualization at length. For example, the inuential study of DeSanctis and Poole (1994) looked at the impact of intentionality of IT use by comparing two groups using the same group decision support system (GDSS), but each using a different decision making scheme. The schemes used by the two groups were in line with the concepts of exploitation and exploration, with the rst group allowing the GDSS features to dene the decision problem, whereas the second group used the GDSS as a basis to brainstorm for other alternatives. Although observations were made, no measures were developed in the study. Similarly, the concepts of informating and automating are discussed in the IS literature as motives for using information systems, but never measured (Venkatraman, 1994; McNurlin and Sprague, 2002). The measures used in our study, however, are conceptually comparable to those used outside of the IT literature for measuring exploitation and exploration. In a study that tests how rms combine marketing strategies (Kyriakopoulos and Moorman, 2004), marketing exploitation strategies were measured as the extent to which the company improves prior skills with respect to areas that include targeting/segmentation, product positioning/differentiation, and product distribution. Marketing exploration strategies, in turn, were measured as the extent to which the company challenged or changed prior thinking with respect to the same areas. Similarly, in a study of cooperative supply chain relationship strategies (Tokman et al., 2007), relationship agreements were dened as exploitation oriented if their purpose was to enhance operational processes and procedural efciencies, comparable to our Factor 1. On the other hand, relationship agreements were dened as exploration oriented if their purpose was to enhance an organizations ability to identify and leverage new opportunities, comparable to our Factor 2. Factors 3 and 4 measure operational and strategic coordination, respectively, as perceived by the supplier. Buyersupplier coordination is a key element of SCM as it enhances competitive performance through internal
information sharing that links functions of suppliers and channel members (Choi and Hartley, 1996; Tan et al., 1998; Zaheer et al., 1995; Vickery et al., 1999). Three scale items are used for each factor. The scale items for operational collaboration are: sharing operational information, coordination of production planning, and utilization of an integrated database for information sharing. The three scale items address coordination between buyer and supplier to achieve efcient task execution as the denition of this construct, and are modications of scale items used in previous studies (Vickery et al., 2003; Subramani, 2004). The three scale items used to measure strategic collaboration are: strategic planning with buyer, planning for new products and programs with buyer, and planning for product conception and design with buyer. All three scale items address coordination between buyer and supplier for organizational planning and positioning strategies as the denition of this construct, and have been used in previous studies to measure strategic supply chain integration (Vickery et al., 2003). However, previous studies have used these scale items to measure coordination from the viewpoint of the buyer rather than supplier, as in the current study. The last two factors, F5 and F6, measure rm performance. Firm performance has been measured in numerous ways in past studies (Handeld and Nichols, 1999; Narasimhan and Das, 1999; Wisner, 2003), with many studies measuring performance as a composite of operations performance measures (Narasimhan and Das, 2001; Scannell et al., 2000). In this study we choose to use a complete set of organizational benets accrued to supplier rms, to provide a richer understanding of performance. Organizational benets are separated into two factors, operational benets (F5) and strategic benets (F6). Three scale items are used to measure each factor. Scale items for operational benets include: cost efciencies from higher sales volumes; improvements to current processes or creation of new products; increased protability. These scale items specically address benets that arise from lowered transaction and production costs, our denition of operational benets. The three scale items for strategic benets are: learning about customers and markets for new products; creation of new products, product enhancements; development of new business opportunities. These scale items directly address the benets that arise through rms positioning themselves to take advantage of opportunities arising in the relationship, the denition of strategic benets. The scale items from these factors are derived from Subramani (2004).
N.R. Sanders / Journal of Operations Management 26 (2008) 349367 Table 5 Factor correlations Mean IT use for exploitation (IT1) IT use for exploration (IT2) Operational coordination (OC) Strategic coordination (SC) Operational benets (OB) Strategic benets (SB) 3.65 2.36 3.62 2.37 2.82 3.18 S.D. 1.72 1.19 1.26 1.40 1.49 1.36 IT1 1.00 0.362 0.301 0.267 0.294 0.286 IT2 1.00 0.246 0.348 0.261 0.256 OC SC OB
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SB
1.00 0.241 0.343 0.276
1.00 0.210 0.327
1.00 0.322
1.00
Note. Correlations in bold are signicant at 0.05 level.
4.4. Measure development and purication The measures used in this study were developed based on procedures outlined by Churchill (1979) and DeVellis (1991). In this section we describe the procedure used to purify the measurement scales and ensure scale adequacy. Scale adequacy was initially tested through the measurement of scale reliability. Scale reliability is the percent of variance in an observed variable that is accounted for by the true score of the latent factor or underlying construct (DeVellis, 1991). When scale reliability is high then all variables that measure a single factor share a high degree of common variance. Cronbachs coefcient alpha is the most commonly employed statistic to measure internal consistency. Specically, the coefcient measures the degree of inter-item correlation in each set of items and indicates the proportion of the variance in the scale scores that is attributable to the true score. Alpha levels below 0.7 are considered unacceptable (DeVellis, 1991). Table 4 shows coefcient alpha values for each factor of the study. The coefcient values range from 0.723 to 0.842, all in the acceptable range (DeVellis, 1991). Further, standardized coefcients, standard errors, and t-values for variable items are also shown in Table 4, with all the coefcients signicant at the p < 0.01 level. 4.5. Convergent and discriminant validity In order to perform meaningful analysis of the causal model, measures used need to display certain empirical properties. The rst of these is convergent validity, which is the degree to which individual questionnaire items measure the same underlying construct. One way to test for convergent validity is to evaluate whether the individual items standardized coefcient from the measurement model is signicant, namely greater than twice its standard error (Anderson and Gerbing, 1988). An analysis of the statistics in Table 4 reveals that coefcients for all items greatly exceed twice their
standard error. Also considering that coefcients for all variables are large and signicant provides evidence of convergent validity for the tested items. In addition to convergent validity, to ensure adequacy of the measurement model it is important to measure that groups of variables intended to measure different latent constructs display discriminant validity. Discriminant validity addresses the extent to which individual items intended to measure one latent construct do not at the same time measure a different latent construct (DeVellis, 1991). We test for discriminant validity in two ways. First, inter-factor correlations are computed for all factors and shown in Table 5. Very high inter-factor correlations, say approaching 1.00, indicate that the items are measuring the same construct, although signicant inter-factor correlations may be observed between theoretically related constructs. An analysis of Table 5 reveals the inter-factor correlations to be quite low. In addition to the simple inter-factor correlation analysis, discriminant validity was further evaluated through a condence interval test. A condence interval of plus or minus 2 standard errors was computed around the correlation estimates between the factors and determined whether this interval includes 1.0. In our test none of the condence intervals contained 1.0, demonstrating discriminant validity (Anderson and Gerbing, 1988). 5. Results 5.1. The measurement model Evaluation of the proposed model was made using structural equation modeling (SEM), following the twostep approach recommended by Anderson and Gerbing (1988). All SEM analyses were conducted using EQS software (Bentler, 1997), one of the most widely used software programs for SEM (http://www.mysoft.com). Prior to estimating the structural model in Fig. 1, conrmatory factory analysis (CFA) was conducted to verify the measurement model.
360 Table 6 Fit statistics for measurement model Fit statistic
Overall t measures Notation Model value 1.972 0.056 0.046 0.965 0.957 0.968 Acceptable value a 2.0 0.06 0.05 0.95 0.95 0.95
Chi-square to degrees of freedom Root mean square error of approximation Root mean square residual Goodness of t index Normed t index Comparative t index
a
x2/d.f. RMSEA RMR GFI NFI CFI
Values set by Bagozzi and Yi (1998).
Table 6 presents t statistics for the measurement model. As recommended by researchers, multiple t criteria are considered in order to rule out measurement biases (Hu and Bentler, 1999). The t indices considered are those most commonly recommended for this type of analysis (Bagozzi and Yi, 1998; Byrne, 1994; Shah and Goldstein, 2006). All the indices are within the recommended range, including ratio of chisquare to degrees of freedom (x2/d.f. = 1.972), root mean square error of approximation (RMSEA = 0.056), root mean square residual (RMR = 0.046), goodness of t index (GFI = 0.965), normed t index (NFI = 0.957),
and comparative t index (CFI = 0.968). Collectively these statistics lead us to judge the overall measurement model t as satisfactory (Byrne, 1994). 5.2. Structural model test results Fig. 2 presents results of the structural model tested evaluating overall model t. Table 7 shows goodness of t statistics and Table 8 provides a summary of hypothesis test results for the structural model. Overall model t indices are as follows: ratio of chi-square to degrees of freedom (x2/d.f. = 251.84/127 = 1.983), root
Fig. 2. The structural model. Note.
**
Coefcients are signicant at p 0.01. Dashed line indicates insignicant paths.
N.R. Sanders / Journal of Operations Management 26 (2008) 349367 Table 7 Goodness of t of the structural model Fit statistic Overall t measures Notation Chi-square to degrees of freedom Root mean square error of approximation Root mean square residual Goodness of t index Normed t index Comparative t index
a
361
Model value 1.983 0.058 0.048 0.969 0.952 0.956
Acceptable valuea 2.0 0.06 0.05 0.95 0.95 0.95
x2/d.f. RMSEA RMR GFI NFI CFI
Values set by Bagozzi and Yi (1998).
Table 8 Summary of hypothesis test results for structural model Hypothesis H1 H2 H3 H4 H5 H6 H7 H8

**
Path g1 g2 g3 g4 g5 g6 g7 g8 IT for exploitation ! operational coll. IT for exploration ! strategic coll. IT for exploitation ! strategic coord. IT for exploration ! operational coord. Operational coord. ! operational benets Strategic coord. ! strategic benets Operational coord. ! strategic benets Strategic coord. ! operational benets
Path coefcient 0.431 0.389** 0.098 0.140 0.394** 0.412** 0.179 0.287**
**
R2 0.526 0.416 0.025 0.092 0.452 0.490 0.093 0.194
Hypothesis supported? Yes Yes No No Yes Yes No Yes
Coefcients are signicant at p 0.01.
mean square error of approximation (RMSEA = 0.058), root mean square residual (RMR = 0.048), goodness of t index (GFI = 0.969), normed t index (NFI = 0.952), and comparative t index (CFI = 0.956). A comparison of these values against those recommended in the literature suggests that the model is satisfactory (Hu and Bentler, 1999). Next we look at ndings relative to specic hypotheses and individual paths of the model. We begin by looking at the hypotheses that relate to pattern of IT use and its impact on the two coordination constructs: H1: The higher the level of IT use for exploitation (IT1) the greater the suppliers perceived level of operational coordination (OC) in the exchange. This hypothesis is supported, as the parameter estimate (0.431) is signicant at p 0.01. H2: The higher the level of IT for exploration (IT2) the greater the suppliers perceived level of strategic coordination (SC) in the exchange. This hypothesis is supported, as the parameter estimate (0.389) is signicant at p 0.01. H3: The higher the level of IT for exploitation (IT1) the greater the suppliers perceived level of strategic coordination (SC) in the exchange. This hypothesis is not supported, as the parameter estimate (0.098) is not signicant.
H4: The higher the level of IT for exploration (IT2) the greater the suppliers perceived level of operational coordination (OC) in the exchange. This hypothesis is not supported, as the parameter estimate (0.140) is not signicant. This rst set of ndings provides interesting insights into how pattern of IT use impacts coordination. Use for exploitation, which is the improvement of current processes, directly impacts operational coordination. The measures used for each construct are typical of those seen in past studies, which have provided support for the positive impact of IT use on coordination (Sanders and Premus, 2005). However, IT use for exploitation is not found to have a direct positive impact on strategic coordination. Similarly, IT use for exploration, which is the development of novel ways of using the technology, supports strategic coordination but is not found to have a direct impact on operational coordination. These ndings suggest that each specic pattern of IT use creates a unique and specic value to the user, the supplier in this case. Next, we look at the hypotheses that relate the two coordination constructs to organizational benets: H5: Operational coordination (OC) has a direct and positive impact on suppliers operational benets (OB). This hypothesis is supported, as the parameter estimate (0.394) is signicant at p 0.01.
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H6: Strategic coordination (SC) has a direct and positive impact on suppliers strategic benets (SB). This hypothesis is supported, as the parameter estimate (0.412) is signicant at p 0.01. H7: Operational coordination (OC) has a direct and positive impact on suppliers strategic benets (SB). This hypothesis is not supported, as the parameter estimate (0.179) is not signicant. H8: Strategic coordination (SC) has a direct and positive impact on suppliers operational benets (OB). This hypothesis is supported, as the parameter estimate (0.287) is signicant at p 0.01. The ndings suggest that operational and strategic coordination each have an impact on achieving a complete set of organizational benets. Strategic coordination is found to have a signicant impact on operational benets, however operational coordination is not found to have a signicant impact on strategic benets. This underscores the complexity of the construct of coordination and suggests that strategic coordination may have an overarching impact on benets. Nevertheless, given that each coordination level directly impacts its respective set of organizational benets, these ndings support the idea that for companies to derive both operational and strategic benets, coordination at both the strategic and operational levels is needed. In our study we did test combining the two benet measures into one versus two factors. Chronbachs alpha, however, for one single factor was below the 0.7 threshold, suggesting that organizational performance should be measured as two separate constructs. A secondary observation from the ndings is that the mean usage of IT for exploitation signicantly exceeds the mean usage of IT for exploration (mean values 3.65 versus 2.36; a 0.05). Although not related to our initial hypotheses, this observation suggests that rms may use IT more for exploitation than exploration. This has two possible explanations and potentially offers some interesting implications. The rst possible explanation is offered by Pagell (2004), in a study designed to understand factors that enable and inhibit integration of operations, purchasing and logistics. Using data from a series of case studies, Pagell (2004) nds that although communication is a key enabler of integration, information systems by themselves do not play a role in integration. In fact, mechanisms of actual faceface interaction were found to be more important than information systems. This nding suggests that the
use of IT may in fact be more conducive for activities of exploitation, which involve automation of processes and bringing efciency to tasks. By contrast, the use of IT may not be sufcient to support activities of exploration, which involve innovation and development of new ideas, and may require face-to-face interaction. A second possible explanation for this observation is offered by March (1991) who suggests that rms indeed engage in activities of exploitation far more than exploration. The reason relates to organizational learning, as exploitation results in immediate positive local feedback that produces a strong path dependence (March, 1991). Therefore, according to Herriott et al. (1985), it is possible for a company to develop such a strong competence in an inferior activity that excludes engaging in a superior activity in which the company has little experience. According to the authors, the result of the tendency to engage in exploitation at the expense of exploration has the potential of long-run organizational self-destruction, as long-run intelligence depends on sustaining a reasonable level of exploration, and that ultimately a balance of both activities is needed for long-run survival (March, 1991). Both possible explanations for this secondary nding are plausible and each has important implications for rms. Future research would be needed to document the necessity of both sets of behaviors relative to the use of IT in supply chain organizations, in order to achieve performance outcomes. Also, perhaps under certain conditions or in certain environments one type of behavior may be preferred over another. Although our study is not designed to test the prevalence of IT use for exploitation versus exploration in organizations, the nal results do offer support that both types of coordination activities are needed to achieve both strategic and operational benets. The secondary nding of this study, however, poses an important area for future research. One possible research alternative, for example, may be to conduct a cluster analysis of the exploiter and explorer scales creating groupings of strategies that could then be compared for outcome differences. Such research would provide a much more detailed perspective on the outcome impact of exploitation versus exploration. 6. Discussion and implications In this paper we tested a model of the relationship between two patterns of IT use by suppliers when communicating with their primary buyer, two levels of coordination activities, and two levels of benets
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accrued to the supplier. A number of important ndings emerge from this study that have both theoretical and managerial implications. The rst and perhaps the most salient feature of this study is that the two complementary patterns of IT use have a differential impact on the two constructs of buyersupplier collaboration, as perceived by supplier rms. These results highlight the variations that exist in patterns of IT use, the differences in the value provided by each, and the importance of conveying these differential benets to suppliers. Business organizations typically make large nancial investments in information technologies, often assuming that acquisition of IT is synonymous with correct IT usage or that system integration is automatically in place. This nding underscores the complex relationship between the use of IT and buyersupplier coordination, albeit from the viewpoint of only one member of the dyad. Coordination between supply chain partners is a result of a range of human interactions that are supported by IT, but are not guaranteed by the mere existence of IT. This is important for managers to keep in mind as they consider various information technology acquisitions. This also underscores the complexity of organizational IT use and offers support to the extant literature that the productivity paradox of IT may indeed be related to organizational factors including pattern of use. A second contribution of this study is the nding that the two coordination constructs, operational and strategic coordination, each have a signicant impact on their respective organizational benets. Specically, operational coordination has a signicant impact on operational benets and strategic coordination has a signicant impact on strategic benets, as perceived by suppliers. Although the impact of operational coordination on strategic benets is not signicant, these ndings suggest that for suppliers to achieve a full set of benets, they must focus on coordination at both the strategic and operational levels. The preponderance of research on coordination to date has focused on the relationship between operational coordination and a subset of operational benets. The dyadic relationship of buyer and supplier characterized by the literature as either cooperative or competitive has failed to address the intricacies of the interaction (Choi et al., 2001; Olsen and Ellram, 1997; Smith and Laage-Hellman, 1992; Subramani, 2004; Wu and Choi, 2005). Our ndings underscore the complexity of the causal structure that contributes to supplier performance and suggests that more studies are needed to engage in a more in-depth evaluation of these constructs and their interrelationships. Although our study looks at coordi-
nation from only the suppliers point of view, the ndings suggest that coordination at both the strategic and operational levels is needed in order to achieve both types of benets, supporting theory in this area. A third important contribution of this study relates to the impact of IT use and buyersupplier coordination on a supplier, rather than buyer, benets. As discussed earlier, buyersupplier coordination, as well as IT use, has been studied extensively from the viewpoint of buying rms. Few studies have specically focused on supplier benets. The current research lls this void. The benets accrued to suppliers are shown to be both strategic and operational. Although operational benets are not unexpected given that coordination, promoted by IT use, is expected to streamline operations, the strategic benets are indeed signicant. The reason is that suppliers, compared to buying rms, are dependent upon the type and quality of information passed on to them by their buyers. This research demonstrates that although suppliers are a few stages removed from the nal customer in the supply chain and are dependent upon the buyer for the information, are still able to derive strategic types of benets from SC coordination promoted by IT use. The nding on supplier benets is particularly important for supplier rms as they are often smaller in size than buyers and must appropriate larger portions of their budgets to acquire the needed technology and skill. This includes purchases of additional hardware and software, staff training and time allocation, as well as resources in developing rewall protection and security of information. The ndings in this study provide support for the value gained by suppliers when investing in information technologies, with the caveat that they consider using the technology for both exploitation and exploration. 7. Limitations and future research The current study does have limitations that need to be noted, and provides directions for future research. This study focused on the types of benets attained by suppliers when using IT to communicate with their primary buyer. One limitation of the current study is that it considers information technology in the broad sense, rather than comparing patterns of use for different types of information technologies. There are many different types of IT and different classications, each potentially having a different impact on performance. Barki et al. (1993) provided one functional classication of IT, where IT was aggregated into six categories: transaction processing
364
systems, decision support systems, inter-organizational systems, communication systems, storage and retrieval systems, and collaborative work systems. Kendall (1997) provided another IT classication, where IT is divided into two categories: productionoriented information technologies and coordinationoriented information technologies. Regardless of classication, it can be assumed that some information technologies have a greater impact on collaboration and performance than others. Further, some information technologies may be more conducive for specic patterns of use. New information technologies are emerging rapidly, such as the recent dominance of wireless IT, which includes wireless devices such as sensors, positioning locators, and networks to provide real-time communication with anyone at any time. Research studies should consider evaluating patterns of use relative to type of IT and their relative effectiveness on performance to help guide practitioners in IT implementation. Another limitation of the current study is that it looks at pattern of IT use and associated benets only from the viewpoint of the supplier. Although this viewpoint is important given the dearth of studies primarily focusing on suppliers, it may be valuable to compare whether ndings on pattern of use apply equally to buyers and suppliers. Given the large expenditures IT investments require, it may be important for future work to consider the impact of pattern of IT use relative to different types of information technologies and their impact on performance, from the standpoint of multiple chain participants. This would better enable rms to make educated decision on how to use a particular IT throughout the supply chain network. Some studies have suggested that to achieve supply chain integration the use and development of information technology should follow a preset sequence (Narasimhan and Kim, 2001). These studies suggest that in order for information technology to be implemented successfully there needs to be coordination and a functional relationship between the stage of supply chain integration and the utilization of IT. This type of analysis suggests the complexity of this issue. The model tested in our current study does not consider this. Future studies may want to consider pattern of IT use relative to the stage of supply chain integration. Our research considers rst-tier OEM suppliers from only one environment, namely the computer industry. It can be argued that members of that industry are technologically savvy and thus may not represent the manufacturing sector as a whole. Future research should expand this type of analysis to include and compare
multiple industries. IT sophistication may well prove to be an important factor that needs to be given consideration. This study used measurement scales developed in earlier research based on a 7-point Likert scale (Subramani, 2004), which may create another limitation. To permit comparability of ndings, we used the same anchors as were used in that study, which were no use at one end of the scale and signicant use at the other. Better anchors may have been selected, such as low use at one end and high use at the other, and future studies may want to take this into account when replicating this research. Despite these limitations, we believe our research provides valuable insights into the relationship of pattern of IT use, buyersupplier coordination as perceived by suppliers, and associated benets to the supplier. 8. Conclusion The use of IT between supply chain organizations has been thematic in recent literature, though primarily examined from the viewpoint of buyer rms. Little attention has been given to the benets accrued to suppliers from the use of these technologies, which can require a signicant allocation of resources. The decision to make this investment is important for supplier rms that typically must appropriate larger portions of their budgets to develop this technological capability. Compounding the challenge are the inconsistencies in the extant literature of the actual benets of IT use, called the productivity paradox, and their impact on inter-rm coordination. To date little conrmatory evidence has been provided on the types of benets suppliers can expect from the use of IT and whether differences in pattern of use impact levels of coordination. Using data from 241 rst-tier OEM suppliers in the computer industry, we tested a model that relates the pattern of supplier use of IT to specic types of buyer supplier coordination activities and a comprehensive set of organizational benets. We evaluated how two patterns of IT use by suppliers exploitation and exploration relate to specic types of coordination activities, which in turn are posited to promote specic organizational benets. Although both types of coordination activities are needed to achieve a full set of benets, we nd each coordination activity to be uniquely promoted by a specic pattern of IT use. IT use for exploitation is found to be an antecedent to operational coordination; IT use for exploration is found to be an antecedent to strategic coordination. No
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crossover between pattern of use and coordination type is found. Our ndings show that to achieve a complete set of benets, suppliers must ultimately use IT for both exploration and exploitation. These ndings provide a deeper understanding of the mechanism of how the pattern of IT use can result in a comprehensive set of organizational benets for supplier rms. References
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Journal of Operations Management 26 (2008) 349367 www.elsevier.

N.R. Sanders / Journal of Operations Management 26 (2008) 349367

N.R. Sanders / Journal of Operations Management 26 (2008) 349367

N.R. Sanders / Journal of Operations Management 26 (2008) 349367

N.R. Sanders / Journal of Operations Management 26 (2008) 349367

N.R. Sanders / Journal of Operations Management 26 (2008) 349367

N.R. Sanders / Journal of Operations Management 26 (2008) 349367

N.R. Sanders / Journal of Operations Management 26 (2008) 349367

N.R. Sanders / Journal of Operations Management 26 (2008) 349367

1.00 0.241 0.343 0.276

1.00 0.210 0.327

Note. Correlations in bold are signicant at 0.05 level.

360 Table 6 Fit statistics for measurement model Fit statistic

N.R. Sanders / Journal of Operations Management 26 (2008) 349367

x2/d.f. RMSEA RMR GFI NFI CFI

Values set by Bagozzi and Yi (1998).

Fig. 2. The structural model. Note.

Coefcients are signicant at p  0.01. Dashed line indicates insignicant paths.

Model value 1.983 0.058 0.048 0.969 0.952 0.956

Acceptable valuea 2.0 0.06 0.05 0.95 0.95 0.95

x2/d.f. RMSEA RMR GFI NFI CFI

Values set by Bagozzi and Yi (1998).

Table 8 Summary of hypothesis test results for structural model Hypothesis H1 H2 H3 H4 H5 H6 H7 H8

R2 0.526 0.416 0.025 0.092 0.452 0.490 0.093 0.194

Hypothesis supported? Yes Yes No No Yes Yes No Yes

Coefcients are signicant at p  0.01.

N.R. Sanders / Journal of Operations Management 26 (2008) 349367

N.R. Sanders / Journal of Operations Management 26 (2008) 349367

N.R. Sanders / Journal of Operations Management 26 (2008) 349367

N.R. Sanders / Journal of Operations Management 26 (2008) 349367

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Coefcients are signicant at p 0.01. Dashed line indicates insignicant paths.

Acceptable valuea 2.0 0.06 0.05 0.95 0.95 0.95

Coefcients are signicant at p 0.01.