The impact of electronically-enabled supply chains on channel relationships and firm performance

The widespread adoption of information technologies (IT) characterising the recent competitive advantage scenario has been of great interest to researchers and practitioners. An important management question today is whether the anticipated economic benefits of information technology are being realised. There have been contradictory findings in the literature regarding its impact on firms’ productivity. While the debate known as the 'IT productivity' paradox still endures, empirical studies have not shown consistent results to clarify how IT offers benefits to the owning firms. Due to information technology having become an integral component in supply chain management, it is important to examine its impact on today’s organisations. While the information technology literature is mixed regarding the direct benefits of information communication technologies on performance and improving competitive advantage, the impact of business to business enabling technologies on supply chain practices remains largely an unexplored area of research. Therefore this study seeks to assess the business value of IT in supply chain relationships and firm performance. The primary research questions are whether and how IT capabilities can create competitive advantage and enhance firm performance through supply chain relationships (channel capabilities). Drawing on the resource based theory of the firm and transaction cost economic theory, this study developed and tested a model that proposes supply chain channel capabilities (information sharing, supply chain coordination and supply chain responsiveness) as higher organisational capabilities which mediate the effects of a firm’s IT capabilities on its market and financial performances. This research study is particularly focused on industries associated with innovative products (based on Fisher’s model (1997)) for which supply chain responsiveness is important. A quantitative approach for data collection and analysis is used. Descriptive and analytical (structural equation modelling) tools were employed to test both the measurement and structural models. This research study's main contribution lies in bridging a research gap by developing and empirically testing a model of IT capabilities that measures how IT can improve the effectiveness of firms’ supply chain channel capabilities and can create competitive advantage and enhanced firm performance. The model includes the dimensions that build the higher order resource of IT capabilities such as electronic integration, human IT resources and IT complementary organisational resources. The “IT productivity” paradox observed in various studies has been attributed to variation in methods and measures, and this study offers an additional explanation: i.e. ignoring IT complementary organisational resources (including IT integration strategy, CEO commitment and customer orientation) in business value of IT on supply chain relationships. The findings of this study reveal that a firm’s inter-organisational information sharing mediates the influence of IT capabilities on firm performance. However, they do not support the direct relationships between IT and supply chain coordination, and consequently the direct relationships between supply chain coordination and firm performance. These findings reveal the complexity of inter-organisational coordination, underscoring the importance for companies to promote supply chain coordination and invest in information technologies that facilitate it. The findings also reveal that improvement in supply chain channel capabilities through IT enables the company to learn and respond to market changes better and quicker than other supply chains (competitors). Practitioners can benefit from the results of this study in terms of the ramifications for investment decisions as well as to benchmark where they stand with their IT in terms of potential for value creation, business support and improving their supply chain management practices.