The role of information technology in supplychain relationships does partner criticality matter

Kim et al. explore the role of information technology in channel relationships and company performance in the context of supply chain communication systems - the information systems that link channel partners in order to carry out such supply chain activities as electronic transactions, quality and cost calibration, and collaborative forecasting and planning. The study explores:

• whether, and in what way, a firm's adoption of advanced technology influences its own and its partner's coordination activities; and

• how IT adoption for supply chain communication systems influences market performance through enhanced channel capabilities of the firm and its partner.

By IT adoption is meant how actively a firm seeks to adopt new technology ahead of its rivals. Company co-ordination is the extent to which a firm co-ordinates transactions with channel partners efficiently. Partner co-ordination deals with how far the channel partner of an IT adopting firm carries out co-ordination activities efficiently. Market performance is assessed by sales growth, market share, market development and product development.

The study reveals that IT adoption for supply chain communication systems enhances co-ordination activities within the supply chain. IT adoption has a positive impact on the firm's own co-ordination as well as the co-ordination activities of its partner. Supply chain members improve their productivities by investing in IT.

The study further suggests that improvements in the firm's co-ordination stemming from IT adoption do not lead to better market performance. The linkage can be established only when IT adoption is linked to market performance through partner co-ordination. Enhancement of coordination activities in one member firm does not promise a real improvement of interfirm co-ordination in the supply chain until accompanied by improvement in the co-ordination activities of its partners.

When the partner is critical to the success of the firm, enhancements in its interfirm co-ordination activities with the partner affect market performance positively. But when the partner is not critical to the success of the firm, such enhancements in co-ordination activities do not influence the market performance of the firm.

In contrast, improvement in the co-ordination activities of a partner that is critical to the success of the firm does not influence the market performance of the firm positively. Only that of a less critical partner affects the market performance of the firm positively.

The reason that enhancements in the co-ordination activities of a critical partner are not helpful to the firm may be that high partner criticality makes the firm highly dependent on the partner, causing an imbalance of power. Against this background, enhancements resulting from IT adoption may not feed through to enhanced market performance, as the partner shifts the distribution of additional value created by IT adoption in its own favour, taking full advantage of its relatively important position.

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