a significant issue. To fulfill this need, this research aims to develop a framework for measuring the IOS capability. Founded by the resource-based theory and company interviews, we proposed four IOS resources: (1) physical IT assets, (2) path dependency, (3) relational intangibles (trust and complementary resources), and (4) market power, and argued that firms with these IOS resources can have higher IOS usage, which in turn creates greater IOS performance. A general survey was then conducted in Taiwan PC industry to validate our proposed framework. The results indicate that physical IT assets and relational-specific intangibles are positively related with IOS usage. On the other hand, path dependency and market power do not have significant impact on IOS usage. We further explore the relationships between the IOS usage and firm performance. The result indicates firms with more IOS usage are more likely to achieve better firm performance. These results can further be examined in a more industry-wide survey in the future. The researchers can also build upon this model to further examine the factors that are discovered.
Keyword: inter-organizational information systems, resource-based theory, IT capability,
IT-enabled supply chains, business value of IT1. INTRODUCTION
Confronting today’s highly competitive global market, increasing customer power, and changing needs lead to a demand of more efficient supply chain management (SCM). Firms must link their internal activities, such as sales forecasting, product design, inventory management, together with their outside business partners, so all the parties in the supply chain can facilitate their processes, collaborate with each other, and reduce transaction costs, etc. However, to effectively integrate with supply chain partners is not an easy task. Firms need to develop a wide range of IT capabilities, such as speed, accessibility, and visibility, to acquire information among several organizations.
These capabilities always center around a successful implementation of interorganizational information systems (IOS), which provide a framework for electronic cooperation between businesses by allowing the processing, sharing and communication of information (Haiwook, 2001;
Williamson et al., 2004).
According to Grant (1991), a capability is the capacity for a team of resources to perform some task or activity. Based on that, we define IOS capability as a capacity for a team of resources which organizations own to develop a successful IOS. Many scholars used the resource-based view (RBV) to measure the IT capability and set up a clear link between IT resources and sustained competitive advantage (SCA) (Bharadwaj 2000; Santhanam and Hartono 2003). For instance, Bharadwaj (2000) used RBV to define a firm’s IT capability as categories of IT infrastructure, human IT resources, and IT-enabled resources, presenting the linkage between firm’s IT capability and financial performance. These scholars treated IT as an internal resource of the firm, and thus their defined IT capability focused only on IT resources within firms. However, an IOS not only interrelates the internal IT or IS resource, but also involves with multiple external resources and variating environment. Therefore, traditional RBV is not sufficient to derive IOS capability.
Some more current resource-based theory studies found that, facing the increasing complex and dynamic environment, the successful market players had rapid and flexible capabilities to respond the changing business environment. They defined the ability to achieve new forms of competitive
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advantage as “dynamic capabilities” (Teece et al. 1997). Besides the dynamic resource-based view, some scholars extended the RBV to relational view while arguing that a firm’s critical resources may extend beyond firm boundaries, and the benefits often link to the relational network that the firm is embedded (Dyer and Singh 1998).
Derived from the relational and dynamic RBV mentioned above, IOS capability should involve the maintenance of specific IOS to link with trading partners, so as to reduce transaction and negotiation costs, improve relationships with customers, keep a long-term contracts and stable transaction volumes and so on. In comparison with IT capability, IOS capability need to consider more aspects from internal to external factors. As past IS/IT capability studies using the RBV have not typically looked at dynamic and relational resources (Wade and Hulland 2004), we think they only capture firms’ internal IT capability. Therefore, our purpose of this study is to apply different views of RBV, especially the relational and dynamic view, to develop a framework that fully captures the components that form the firm’s IOS capability.
This research investigates the IOS capability that today’s corporations have to obtain for better IOS usage and performance. The questions addressed can be summarized as follows:
1. What are the important IOS resources that firms need to obtain to improve their IOS performance?
2. How can we measure these IOS resources?
Through answering these questions, the study seeks to better explain:
1. The IOS capability framework from different views of RBV, especially including the dynamic and relation view.
2. The key resources that can lead to significant IOS usage and better IOS performance, so that managers can decide which specific constructs of IOS resources should be taken into more consideration in order to improve their current IOS or to built a better future IOS.
2. LITERATURE REVIEW
In this study, we will use the resource-based view to propose a measurement system for evaluating a firm’s IOS capability and to examine its association with firm performance. Before describing our proposed model, we introduce the basic concepts of resource-based view as follows.
2.1 The Resource-based Theory
First of all, we focus our attention on the initial RBV in the traditional strategic management field.
The initial resource-based theory argued that competitive advantages of a firm resulted from specific resources and capabilities possessed by the firm (Learned et al. 1969; Porter 1981; Barney 1991; Grant 1991). Some researchers viewed capabilities as one of significant firm resources, and others distinguished the capabilities from the resources by arguing that resources were the source of the capabilities, and a capability was the capacity for a team of resources to perform some task or activity (Grant 1991). But all agreed that a firm could appraise its potential of competitive advantages by means of identifying its internal resources and capabilities and selecting a suitable strategy to reduce resource gaps (Grant 1991).
However, identifying and appraising resources and capabilities is a major handicap. One useful way is to classify them by looking for those attributes which have potential of competitive advantages.
Overall, Barney (1991) and Grant (1991) classified resources as six categories: financial, physicals, human, technological resources, reputation, and organizational resources.
What we mentioned above concentrates on tangible resources. Hall (1992, 1993) argued intangible resources such as reputation should also play an important role in strategic management process,
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and therefore he extended the initial RBV model to identify the intangible resources which are the feedstock to the capability differential. He classified intangible resources as assets such as patents, copyright, contracts, trade secrets, etc., or as skills/competencies such as know-how of employees, suppliers, and distributors; and culture.
2.2 The Dynamic View of Resource-based Theory
Some researchers found that the successful market players do have some capabilities that enable them to face complicated and changing environment, such as the capability of timely responsiveness, rapid and flexible product innovation, and the management capability to effectively coordinate and redeploy internal and external competences (Teece et al. 1997). In order to capture these capabilities, researchers extended the traditional RBV, which mostly focused on dealing with internal resources, to define a new set of capabilities, ‘dynamic capabilities.’ The focal point of dynamic capabilities is to hold the timing and then to adapt, integrate, and reconfigure internal and external resources and competences to respond the rapid technological change and changing business environment.
2.3 The Relational View of Resource-based Theory
The resource-based view (RBV) of the firm argues that differential firm performance is fundamentally due to firm heterogeneity rather than industry structure, and focus on those resources that are housed within the firm. In fact, the advantages and disadvantages of the firm often link to relationship of industry network in which the firm is embedded. So, a firm’s critical resources and capabilities may extend beyond the organization boundaries, or even extend to the interfirm routines and processes (Dyer and Singh 1998).
The ownership of rent-generating resources mentioned above is collective with outside trading partners, contrasting with the RBV focusing on how individual firms generate benefits from resources within firms, and the dynamic view emphasizing on the capabilities to reconfigure resources to response environment. We must appraise relational resources and capabilities as important sources of the competitive advantages of the firm embedded in industry.
3. DEVELOPMENT OF THE IOS CAPABILITY FRAMEWORK 3.1 Research Framework
The past literature summarizes the key resources and capabilities that help firms gain sustained competitive advantages. Combined the RBV with the dynamic and relational view, we summarize twelve resources to form the IOS capability and link it to IOS usages and performance: (1)physical IT assets, (2)financial assets, (3)inter-relation specificity assets, (4)integration, (5)learning, (6)path dependency, (7)contracts, (8)interfirm knowledge sharing, (9)complementary resources, (10)policy, (11)market power, and (12) people skills. The first three address company’s tangible IOS resources, the following eight are related with the intangible IOS resources, and the last one are dependent on people skills.
Three criteria have adopted to filter our variables. First, we remove the factors for which data is hard to acquire. Financial investment on IOS is thus dropped as the interviewing firms expressed the difficulty to isolate this information from the overall IT budget. Among the tangible resources, we chose physical assets as our testing variables since our pilot firms all agreed it is the most important tangible resource for IOS development and it can represent general condition on tangible resources.
Second, some variables that do not apply Taiwan PC industry are eliminated. Therefore, the reciprocal investment is dropped because component suppliers in Taiwan PC industry don’t have the chance doing that because almost all of them are small and medium sized enterprises (SMEs).
We also exclude IOS integration because system integration has been well recognized and justified
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as an important factor for IOS implementation in those companies. Interfirm knowledge sharing is removed due to a very little practices have done in our sampling pool, although the pilot firms agree that they are a significant driver of IOS usage. Policy is dropped as well, because the data may lack variety in view that our sampling is in the same region which applies the same policy. The pilot firms also indicated that all of suppliers had training courses about using IOS and could use IOS to handle routine work in a short period time. It reveals that the human IT skill differentials are also small in these suppliers. For this reason, we exclude the people-based skills from our model.
The third reason is about questionnaire scope. Learning capabilities include various issues about knowledge management cycle. We decide to test it latter as a future extension. We chose path dependency as our testing variable considering its novelty and conceptual simplicity.
Finally, we propose a simplified research framework that includes four resources to form the IOS capability and link it to IOS usages and performance (Figure 1): (1)physical IT assets, (2)path dependency, (3)relational intangibles, and (4)market power.
Figure 1. Research Framework
3.2 Hypothesis
3.2.1 Tangible IOS Resources
Physical resources like IT infrastructure are the basic resources of the IOS capability. Many IOS studies argue that firms with more flexible IT infrastructure are more able to develop successful IOS.
For instance, Ramamurthy and Premkumar (1995) referred that IS sophistication would be positively related to EDI’s internal and external diffusion, and it included hardware and software resources to support IOS systems. Recently, Zhu and Kraemer (2005) had asserted technology competence such as technology resource and IS capability as sources of e-business usage and value.
Hence, we have the following hypothesis:
Hypothesis 1. Firms with more physical assets related to IOS technology are more likely to achieve a greater IOS usage.
IOS Usage Physical IT Assets (H1)
Tangible IOS Resources