2. LITERATURE REVIEW
2.1. Responsiveness
2.1.3. Promptness
國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
12
customers. Organizations can easily collect and integrate customers’ thoughts, feedback and experiences for better service performance. Customer-linking capability thus refers to an organization’s ability to recognize customer demand and to create, maintain and improve the way it provides services and products to achieve a higher level of customer satisfaction and loyalty as well as increased sales and profits (Dick
& Basu, 1994; Hooley et al., 2005). An organization’s customer-linking capability creates a potential competitive advantage in business (Rapp et al., 2010). Well-managed customer relationship creates a great opportunity to increase customer value and provides a way to systematically attract, acquire and retain customers (Lin & Su, 2003).
2.1.3. Promptness
According to surveys conducted in the service domain, many business people believe that mistakes drive customers away, but that is a misconception. Customers tolerate mistakes, but the failure to respond promptly to resolve conflicts has the potential to destroy relationships. Because a responsive organization is better prepared to thrive in a competitive and turbulent environment, promptness has become a necessary component in an organization’s competitive strategy (Richards, 1996;
Yusuf et al., 1999; Meredith & Francis, 2000; Highsmith, 2004).
Given the importance of promptness known as the agility, many definitions have emerged since Nagel and Dove (1991) first associate agility with organizational abilities. Kumar and Motwani (1995) define it as the ability to accelerate activities on a critical path that commences with the identification of a market need and terminates with the delivery of customized products and services. Vokur and Fliedner (1998) consider promptness to be the ability to produce and market successfully a broad range of low-cost, high-quality services with short lead times in varying lot sizes,
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
13
thereby providing enhanced value to individual customers through customization.
Sharifi and Zhang (1999) define it as the ability to cope with unexpected challenges, to survive unprecedented threats in the business environment, and to take advantage of changes as opportunities. McGaughey (1999) and Gunasekaran (1999) both describe it as the ability to provide service to customers quickly and effectively. For Sanchez and Nagi (2001), promptness is an overall strategy focused on thriving in an unpredictable environment by making prompt responses to the complexity brought about by constant change. Sambamurthy et al. (2003) define it as the ability to detect and seize market opportunities with speed and surprise.
Among all of the definitions, the one Kidd (2000) provides is the most comprehensive: A prompt organization is a fast-moving, adaptable and robust business. It is capable of rapid adaptation in response to unexpected changes and events, market opportunities, and customer requirements. Such a business is founded on processes and structures that facilitate speed, adaptation and robustness and that deliver a coordinated enterprise capable of achieving competitive performance in a highly dynamic and unpredictable business environment to which the enterprise’s current practices are poorly suited.
SMEs must work especially hard to maintain the loyalty of their customers because they face an endless stream of competition from larger companies that have the money and manpower to be “on call” for their clients constantly. Based on the definitions above, we can conclude that fast responses and efficient communication in market, partners and customers are vital for SMEs if they are to achieve business success.
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
14 2.2. IT-enabled collaboration among SMEs
SMEs' performance is usually limited by their scarce resources, such as their limited financial budget, few qualified employees, managerial and technological competency barriers, and a lack of long-term strategies (OECD, 2010). Many researchers have shown that collaboration is an effective way for SMEs to achieve better performance and long-term survival (Dollinger & Golden, 1992; Gomes-Casseres, 1997; Sivadas & Dwyer, 2000; Bastos, 2001; Hitt et al., 2004; Merrifield, 2007; OECD, 2010). Collaborations can be conducted either horizontally with SME partners or vertically with customers.
The flourishing of IT in the last decade has facilitated collaboration (Pavlou, 2002; José-Juan et al., 2006; Skipper et al., 2008). Barua et al. (2004) and Martinez-Fernandez (2001) state that information technology has provided the means to share information more efficiently and effectively, thus improving coordination and collaboration activities. We will discuss two types of IT-enabled collaboration below:
(1) collaboration with SME partners; and (2) collaboration with customers.
2.2.1. Collaboration with SME Partners
SMEs have faced challenges to their survival with their limited resources and little support from governments. These unfavorable circumstances deteriorate further in uncertain economic periods like the current crisis because SMEs do not have access to capital markets and their sources of external financing are much more limited than those of large organizations (Udell, 2009). However, studies have shown that collaboration between SME partners is an essential way for such companies to survive today (Berry, 1997; Hoffmann & Schlosser, 2001; Varamaki & Vesalainen, 2003;
Narula, 2004).
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
15
Collaboration between partners is the process by which two or more business partners work together to pursue a common purpose or goal using shared resources and co-commitment (Michael & Lois, 2010). The introduction of information technology communication tools offers a new way for organizations to form and maintain cooperative relationships with one another (Martinez-Fernandez, 2001). This IT-enabled collaboration creates new kinds of interfaces between organizations that can take a multitude of forms.
An examination of the literature shows four types of benefits of collaboration among SMEs: (1) Strategy-oriented, where organizations collaborate through information technology to achieve strategic objectives, such as gathering information, maximizing profit, and gaining market advantages; (2) Transaction-cost-oriented, where transaction costs can be reduced by including a larger population of stakeholders in transactions for minimal marginal expense (Berry, 1997; Dhanaraj &
Parkhe, 2006; Biswas et al., 2007; Meixner & Haas, 2008); (3) Resource-oriented, where organizations in need of additional resources that cannot be purchased via market transactions or built internally with acceptable cost (risk) or within an acceptable amount of time (Eisenhardt & Schoonhoven, 1996) are able to engage in value creation by combining internal and external resources in innovative ways (Ma, 2009); and (4) Knowledge-oriented, where, through seamless knowledge management, information exchange creates a convenient communication channel that establishes a sense of exclusivity among those organizations with collaborative access (José-Juan et al., 2006; Pavlou, 2002; Ma, 2009), and knowledge storage is achieved while collaborating (Meixner & Haas, 2008).
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
16 2.2.2. Collaboration with Customers
Both large and small organizations must focus on their customers to survive.
Customers tend to be slow to adopt new services if organizations do not provide effective cognitive tools to help customers learn about the benefits associated with these new services. Acquiring a new customer can cost up to five times more than persuading an existing customer to make a new purchase (Adrian, 2002). The insertion of the customer into the chain of value by acquiring direct knowledge of his/her opinions and complaints is a factor in the success of businesses engaged in IT-enabled collaboration (José-Juan et al., 2006). Therefore, it is important to help resource-limited SMEs to create innovative offerings with low-cost and easily obtained benefits to improve their sustainability and to increase their chances of success.
Today, organizations increasingly involve their customers in service and product processes (Kausch, 2007). One crucial reason for collaborating with customers is their low satisfaction with an organization’s existing services and products (Atuahene-Gima, 1995; Goldenberg et al., 2001). The main problem is that customers have requirements and expectations that are unknown to the service provider with the means to satisfy them (Thomke & Von Hippel, 2002). Encouraging customer collaboration from the beginning can provide better insight into customers’
requirements and expectations and can yield a product or service that is better suited to the market (Kausch, 2007). Another reason to collaborate with customers, offered by Chesbrough (2004), is the reduced amount of time available to develop new services and products due to the growing speed of information technology.
Collaboration with customers can be facilitated by information technology.
Alam (2002) describes four stages in which organizations maintain relationships with
‧
information and feedback on specific issues; (3) extensive consultation with customers; and (4) customer representation. Whereas the first two stages represent passive involvement of customers in the service development processes (with limited input and feedback), customers are increasingly being asked to contribute ideas and suggestions themselves, as in the latter two stages (Sawhney et al., 2005). Kristensson et al. (2004) find that ordinary customers are better able to develop original and valuable ideas than are professional customers. Matthing et al. (2004) find a similar result in their study: contributions from customers were rated more helpful than those from professional service developers. Clayton and Criscuolo (2002) find that IT facilitates collaboration to improve these four stages by turning ideas into marketable decisions for a wide range of customers, with reduced search costs and costs of access to markets; changed processes and shared information and resources between organizations and customers; and a shift in the balance of power between organizations and customers due to the increased availability of information. Thus, IT now views customers as service producers and assists organizations in providing better service.Table 2-2. Four levels of customer involvement (Alam, 2002)
Stage Explanations
Passive acquisition of input.
Users take the initiative to provide input into the development process.
For example, a customer approaches the service producer with a new
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
18 Extensive
consultation with users.
The service producers take the initiative and invite user input by means of a planned process governed by predetermined objectives. Common examples include detailed interviews with the users, focus group research, and group discussions.
Representation Users are invited to join a new service development team, where they contribute to the specific stages of the development process in their capacity as a team member.
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
19
3. RESEARCH MODEL AND HYPOTHESES
Figure 3-1. Research framework
Our research framework is shown in Figure 3-1. We argue that SMEs can enhance their responsiveness through IT-enabled collaboration and that these enhanced responsiveness capabilities will in turn improve SME performance.
SME performance can be measured in many different ways. According to Dixon et al. (1990), until the 1980s, performance measurements in the literature largely concentrated on financial indicators, including profitability (e.g., return on investment [ROI], earnings before interest and tax [EBIT], and gross profit margins), market share growth, sales growth, and efficiency (e.g., return on sales [ROS] and return on equity [ROE]). In the 1990s, non-financial performance was widely discussed. For example, Huselid (1995) and Youndt et al. (1996) suggest that performance could be measured by product quality and delivery time, employee morale and productivity, and inventory management and equipment utilization.
Wahlberg et al. (2009) suggest that an organization’s performance could also be
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
20
measured by CRM processes. Reinartz et al. (2004) investigate organizational performance by implementing CRM processes through relationship initiation, maintenance, and termination.
To summarize the literature, measurements of organization performance fall into three categories: financial, operational and relational. We will measure SME performance accordingly, and the details of our research framework are described below.
3.1. The Effects of IT-enabled Collaboration
3.1.1. Effects of Collaboration with SME Partners
Marketing theorists stress the importance of continually learning about the market environment. This learning process involves a series of information processing activities (Day, 1994). Through IT-enabled collaboration with business partners, information on consumers, competitors and other channel members can be acquired and interpreted in light of past experiences and knowledge on the same platform, then used to assist in decision-making. Through the above processes, intangible information and knowledge are transformed into a visible marketing response (José-Juan et al., 2006; Ma, 2009). Appropriate use of information is fundamental to the ability to sense market requirements (Rogers et al., 1991). If an organization does not have adequate and accessible resources and information, it stands at a distinct competitive disadvantage (Herbig & Shao, 1993). Haeckel and Nolan (1993) further stress that information technology is critical to managing conditions that are too turbulent to make sense of. IT-enabled collaboration thus allows resource-limited SMEs to acquire and share information efficiently and effectively, which strengthens their ability the read the market. Therefore, we hypothesize the following:
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
21
Hypothesis 1-a: IT-enabled collaboration with SME partners has a positive impact on market-sensing capability.
Although customer relationships are viewed as an intangible resource that may be relatively rare and difficult for others to replicate (Srivastava et al., 1998; Hooley et al., 2005), the capability of SMEs to acquire and manage customer information is limited due to their smaller scale. By coordinating information and activities with strategic partners, a SME can develop more ways to attract customers, and become more responsive to customer requests and build greater customer loyalty and better customer relations (Stock, 1990; Rapp et al., 2010). Therefore, we predict that customer-linking capability can be improved by collaboration through information technology:
Hypothesis 1-b: IT-enabled collaboration with SME partners has a positive impact on customer-linking capability.
SMEs usually lack promptness because of their lack of resources. To enhance promptness, it is important to increase communication and collaboration and improve decision-making processes (Lee et al., 2006). SMEs can acquire necessary resources and capabilities by forming alliances (Fernández & Nieto, 2005). Smith et al. (2007) argue that organizations involved in alliances are better able to utilize resources, improving their speed to the market and their speed in serving customers. Information technology makes such coordination more feasible (Kumar & Dissel, 1996). Paulraj and Chen (2007) state that IT-enabled collaboration increases information processing speed by providing an intermediary platform for partners to share knowledge, provide
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
22
timely information, and transcend each firm’s boundaries. We hypothesize the following:
Hypothesis 1-c: IT-enabled collaboration with SME partners has a positive impact on promptness.
3.1.2. Effects of Collaboration with Customers
Unlike large organizations, SMEs do not have the resources to engage in formal market research (Keh et al., 2007). For SMEs to sense the market precisely and adapt to it, they must collaborate with their customers to collect a significant amount of data and analyze it. This analysis will provide them with better insight into customer requirements and expectations, ultimately resulting in a service that is more suited to the market (Kausch, 2007). With the help of information technology, SMEs are able to gather, store, access, and analyze customer data to effectively make strategic business decisions (Swafford et al., 2006). Therefore, we hypothesize that IT-enabled collaboration with SME customers provides an environment for organizations to collect and analyze market data from customers and thus enhances the capability of organizations to sense the market.
Hypothesis 2-a: IT-enabled collaboration with SME customers has a positive impact on market-sensing capability.
One crucial reason for conducting customer-linking activities is low customer satisfaction with services and products provided by organizations (Atuahene-Gima, 1995; Goldenberg et al., 2001). It is especially important for SMEs to listen to
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
23
customers’ opinions and complaints directly to raise their level of service and product satisfaction. However, linking to customers is a time-consuming and resource-demanding process for SMEs. It is therefore essential for SMEs to enhance their customer-linking capability by collaborating with customers through a friendly, accessible, and directly interactive channel so that customers feel comfortable giving feedback (Kausch, 2007). Füller et al. (2009) observe that, with the help of IT, organizations are able to form new channels to collaborate with customers, effectively sharing knowledge and managing relationships. As a result, IT-enabled collaboration with customers may reduce the distance between resource-limited SMEs and customers. Thus, we develop the following hypothesis:
Hypothesis 2-b: IT-enabled collaboration with SME customers has a positive impact on customer-linking capability.
Whereas large organizations can simply employ a number of people to take care of their customers immediately, resource-limited SMEs may struggle to respond quickly to the demands of their customers. For SMEs, a fast and efficient communication tool to learn about customers is vital if they are to achieve business success. Through collaboration with customers, SMEs are able to learn about their customers in multiple ways, shortening development time. Moreover, IT enables organizations to reduce the time required to share information and reduce response time to unforeseen events, thereby enhancing promptness (Katayama & Bennett, 1999;
Mondragon et al., 2004). Therefore, we hypothesize that SMEs gain promptness through IT-enabled collaboration with customers.
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
24
Hypothesis 2-c: IT-enabled collaboration with SME customers has a positive impact on promptness.
3.2. The Impact of Responsiveness Capabilities on Performance
Lack of financial assets is a problem that has long troubled SMEs, preventing their sustainable development and competitiveness in the long run. Therefore, it is especially important for SMEs to attract new customers at low cost. The literature suggests that market-sensing capability is related to aspects of firm performance such as profit and customer satisfaction. According to Slater and Narver (2000), better market-sensing capability allows an organization to discover underserved market segments and those where its rivals' offerings may not be fulfilling customers’ needs.
These underserved and unsatisfied segments are good targets for organizations seeking new customers. Hult (1998) and Morgan et al. (2009) suggest that market-sensing capability provides market insights that enable organizations to reduce their costs through effective use of resources by better matching the organization's resource acquisitions and deployments with customer and prospect opportunities. By doing so, we assume that SMEs are better able to forecast the value of different resources accurately, which enables them to manage resources better to achieve higher performance (Makadok, 2001). As a result, we expect the following:
Hypothesis 3-a: Market-sensing capability has a positive impact on SME performance.
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
25
SMEs may spend their limited resources and time on other tasks at the cost of customer satisfaction. This trade-off is a significant way in which SMEs lose business to their larger competitors. Managing relationships with customers is therefore critical.
In our study, customer-linking capability has been defined as an organization’s ability to manage its relationship with its customers by contacting them directly.
Direct customer contacts shorten service cycles and lower service costs. Nielsen (2002) and Hooley et al. (2005) suggest that customer-linking capability enables the development and maintenance of strong customer relations and ultimately improves customer satisfaction and loyalty. As a result, we expect the following:
Hypothesis 3-b: Customer-linking capability has a positive impact on SME performance.
Due to their smaller scale and limited funds, SMEs need to determine the most efficient and effective market strategies for improving their performance. A firm’s promptness represents the strength of the interface between the organization and the market (Mason-Jones & Towill, 1999). Organizations that are prompt in response to customer requirements demonstrate operational flexibility, which can eliminate waste in their operations, better direct their interactions with their customers to improve customer retention, and in general, reduce the costs incurred in servicing their customer base. We believe that promptness can yield better SME performance in two ways: gaining profit by quickly adapting to market changes and reducing cost by eliminating waste from operations. Thus, we posit:
Hypothesis 3-c: Promptness has a positive impact on SME performance.
‧ 國
立 政 治 大 學
‧
N a tio na
l C h engchi U ni ve rs it y
26
4. RESEARCH METHODS
To test our research framework, we developed a case study of eight different case SMEs in the Mt. Pillow Leisure Agriculture Area in Yilan County. In this section, we will provide the background descriptions of our cases.
4.1. Case Background & Research Methodology
Tourism is an important industry for the Taiwanese economy and is dominated by SMEs, which represent 90% of all tourism businesses. Economic growth and social change have made leisure activities an important means of satisfying people's recreational needs. The recent rapid development of leisure agriculture in Taiwan illustrates the growing demand for recreation resources.
Leisure agriculture is a new trend in agricultural operations that combines local industry, cultural characteristics, leisure, natural ecology, and accommodations.
With its unique geography and diverse cultural and natural resources, Taiwan possesses significant potential to develop leisure agriculture. However, SMEs involved in leisure agriculture are seldom able to collaborate to enhance their
With its unique geography and diverse cultural and natural resources, Taiwan possesses significant potential to develop leisure agriculture. However, SMEs involved in leisure agriculture are seldom able to collaborate to enhance their