Exploring the Effects of Information Sharing on Organizational Dependence

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Exploring the Effects of Information Sharing on Organizational Dependence

Yi-Ming Tai

Department of Information Management, National Pingtung Institute of Commerce

Pingtung 900, Taiwan

Yi-Cheng Ku

Department of Computer Science and Information Management, Providence University,

Taichung 433, Taiwan

Shu-Chiung Lin

Department of Information Management, Tatung University

Taipei 104, Taiwan

Shu-Chen Yang

Department of Information Management, National University of Kaohsiung

Kaohsiung 811, Taiwan

ABSTRACT

Researches in marketing suggest that delivering specific services to foster customer dependence on the relationship is a strategic imperative for retaining profitable buyer firms. Sharing valuable information can be regarded as the useful means to increase buyer dependence and maintain relationship over the long term. Because supply firms provide information sharing services to their buyer firms can help buyers reduce supply uncertainty and facilitate production planning. Information sharing has been widely studied in many inter-organizational relationship issues and has been regarded as a vital element in strengthening inter-organizational cooperation. However, most evidence of information sharing benefits in a business-to-business context is focused on reducing the uncertainties in the supply chain, especially from the buyers’ perspective to investigate how to employ information sharing to coordinate their suppliers. There are seldom studies which have focused on whether suppliers can employ information sharing to increase buyer dependence. This study attempts to employ empirical methods to understand the effects of information sharing on buyer dependence. The research results will provide valuable information to support manager’sdecision ofadopting information sharing policies on their customer relations maintenance programs.

Keywords: Information Sharing, Relationship Maintenance

Intention, Buyer Dependence

1. INTRODUCTION

Increasing complexity and uncertainty in the market place combined with intensifying global competition are forcing companies to reduce costs and outperform the price. For achieving cost competitive advantage, production in many companies has been transferred to low-labor cost countries. Competing only with price is risky if customer switching costs are low [20]]. To retain customer relationship companies need to create more competitiveness value to their customers [6], [35]. For responding to the issue of customer relationship

maintenance intention, marketing academics and practitioners have engaged in considering how to increase customer perceived value. This eventually led to the introduction of the concept of relationship marketing [16]. The goal of relationship marketing is to retain customers by catering to their individual needs [26][10].

Information sharing can be regarded as an important strategy based on information technology (IT) to create an ongoing relationship with the customer [1][28]. Previous studies have found that information sharing is the important means to encourage the motivation of customer to commit to a relationship [25, 28]. In an environment of supply uncertainty, if the supplier could share information useful to help buyer to make informed decisions and reduce inventory cost, the buyer may tend to become more dependent on the supplier. Social psychological research has demonstrated that, in a dyadic exchangerelationship,an actor’shigh levelofdependenceon another actor may generate a high level of commitment to the relationship, thereby leading to the adoption of an orientation toward loyalty [23, 30].

From the viewpoint of relationship marketing, information sharing can be seen as a valid marketing strategy if, and only if, it can bring an advantage to the company, such as influencing the buyer’s relationship maintenance intention. To realize the effects of information sharing on buyer firm’s relationship intention, a good understanding of how the buyer perceived value in the context of information sharing is necessary for the development of a good solution for implementing relationship marketing through information sharing. Despite previous studies have revealed the importance of information sharing for inter-organizational cooperation, most evidence of information sharing benefits in a B2B context is focused on reducing the uncertaintiesin thesupply chain,especially from thebuyers’ perspective to investigate how to employ information sharing to coordinate their suppliers (e.g. [8][12][41]). However, very few studies have been done from the viewpoint of relationship marketing to investigate whether suppliers can employ information sharing to influencetheirbuyers’dependence.

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This study draws on the concepts from the interrelated streams of literature on information sharing, relationship marketing, and organizational dependence to develop the key constructs and relationships associated with how information sharing affect buyer dependence (i.e. level of buyer dependence on the supplier). Thus, the research question of this study can be stated as:

Whether the magnitude of buyer’s dependence on the supplier can be affected by the act of information sharing?

2. CONCEPTUAL BACKGROUND Organizational dependence

Dependence, or the extent to which it is necessary to maintain relationships with specific partner to achieve desired goals, is the important construct in understanding the supply chain relationship, because supply chain members are dependent on each other [22, 27]. The dependence of a target firm on a source firm refersto thetarget’sneed to maintain arelationship with the source to achieve its goals [15, 19]. When the greater the percentageofa firm’ssalesand profitcomesfrom itsexchange partner, the firm is highly dependent on the exchange partner. Thefirm’sdependenceon itsexchangepartnerisa sourceof power for the partner, and vice versa [7, 18]. If a firm was more dependent on its exchange partner, the partner’s dependence advantage was construed as the source of the partner’spower. Studies in organizational sociology used the term, relative dependence, to portray the difference between a firm’s dependence on itspartnerand itspartner’sdependence on the firm.

Relative dependence asymmetry refers to the comparative level of dependence between buyer and supplier and the direction of asymmetry indicates which party is more dependent [18, 22]. A deeper understanding of the impact of relative dependence asymmetry on relationship maintenance requires distinguishing between the more and the less dependent party. For the less dependent party, having relative power over its weaker partner makes it not need to develop a high-quality relationship, because it can use its partner’s dependence to obtain its cooperation. The presence of asymmetry reduces the motivation of the relatively less dependent firm to identify with or become attached to the weaker partner. For the more dependent party, heavy dependent on its partner makes it tend to be more compliant and willing to continue the relationship since it is the necessary thing to do [9, 15].

Relationship marketing

The concept of relationship marketing can be viewed as the philosophy of turning transactional exchange into relational exchange that focuses on attracting, developing, maintaining and enhancing customer relationships [4, 5]. Relationship marketing is a continuous process that takes place in the long run, rests on an in-depth understanding of customer needs and characteristics [21]. The advantages of relationship marketing can accrue to a firm if, and only if, the customers can perceive the value of the relationship and want to engage in relationship with the firm [34]. Therefore, to be successfully implemented, relationship marketing should reflect the value system of the target customer.

Relationship value is an antecedent to behavioral outcomes in the nomological network of relationship marketing.

Relationship value that the customer perceives directly impacts its intention to expand business with a supplier. In developing relationship marketing activities, firms must recognize that customers receive benefits from their experiences and that a well-designed relational bonding strategy may influence their value perceptions [40]. Structural bond is one types of relational bonding strategies that previous relationship marketing studies suggested can be used to enhance buyer–supplier relationship [29].

Berry [4] suggested that when the company can offers target customers value-adding benefits that are difficult for other companies to provide, the company creates a robust structural bond with customers, effecting to maintain and enhance relationships. The relationship marketing solution that relies on structural bond is designed into the service-delivery system. The structural bonding strategy employed to retain customer needs can provide valuable services that are not readily available elsewhere, such as services of sharing production and supply forecasting information. Previous studies found that many leading companies in supply chain have emphasized structural bonds through information sharing services [24, 39]. Structural bonds provide the greatest opportunity for firms to bind their customers since a structural bond may strengthen customers’ perceptions of utilitarian value and can raise opportunity cost of switching to other suppliers.

Information sharing

Previous studies in supply chain management argued that information sharing is an important factor that affects supply chain participant’sexpectation ofmaintaining continuity ofa relationship [32, 33]. The ideal effect of sharing information on buyer is a scenario in which a company is able to acquire customer loyalty by offering and transferring relevant information to satisfy customers’needs,wantsand desires.In this study, information sharing is regarded as the seller’s marketing act of transferring the meaningful information to buyers and making them feel valuable of retaining relationship with the seller. This notion focuses on the one-way information transfer from seller to buyer and the efficacy of such act lies in producing the desired marketing effect.

The information usually shared between trading partners includes order status, shipment tracking, sales forecasts, production schedules, inventory levels, product specifications, product descriptions and prices, sales promotions, and capacity planning [24, 37]. Once the firms are willing to apply information sharing for maintaining customer relationship, they need to design their information sharing scheme depending on customer needs and wants capable of being perceived by customers for its value.

Trust and commitment

Trust has been widely studied in many inter-organizational relationship issues and is defined as the future expected behavior of a partner in terms of keeping promises and acting benevolently based on past experience [17, 36, 42]. Trust occurs when one party believes that the other party's actions would result in positive outcomes for itself. Previous studies in the field of inter-organizational management suggested that trust is a key aspect in defining the emotional aspect of the relationship for both trading parties, determining whether trading parties expend resources to develop relationships [11, 38].Trustnotonly affectsfirms’intention and behaviortowards their trading partners but also provides a common ground to

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both of them to solve their problems. Trust in exchange relationships lead to cooperative problem-solving and therefore trading parties in ongoing relationships characterized by high trust will strongly desire to continue these relationships [14, 22].

Relationship commitment, similar to trust, has recently emerged in the supply chain literature as a critically important element for maintaining long-term relationships [13, 14]. Commitmentcan beregarded asapartner’sdesireto develop a stable relationship and a willingness to make short-term sacrifices to maintain the relationship. Commitment demonstrates that the partner has genuine intention to make the relationship work [1, 28]. Previous studies suggested that commitment is an enduring desire to maintain a valued relationship, and incorporates intention and expectation of continuity, and willingness to invest resources in the relationship [15, 31]. It leads to greater relational social norms and increases relationship benefits. The relational social norm, such as reciprocity norm, is embedded in the commitment, suggesting that another party is likely to reciprocate its commitment in the same way, and this in turn further support strengthens the relationship.

3. RESEARCH MODEL

This study suggests that using information sharing as a strategy for relationship marketing may be effective in building social bonds (entity relations) and structural bonds (customized service) with buyer firms. In order to analyze the impact of information sharing on buyer dependence, this study employs an empirical study to investigate the causal paths of the effects forming of implementing information sharing.

The objective of this study is to analyze whether implementing information sharing is a worthwhile effort to foster customer value and increase its dependence. Based on the conceptual background discussed in section 2, this study proposes a relationship marketing-based model (as shown in Figure 1) to investigate the impact of information sharing on enhancing the degree of customer dependence. The model is viewed from the buyer’sperspective.

The research model includes a second-order constructs (i.e. information sharing services) and ten first-order constructs (i.e. order information, operational information, managerial information, strategic information, buyer dependence, trust and commitment). Based on previous studies of information sharing, this study argues that information shared to create a long-lasting relationship with a business buyer can be classified as order level information, operational level information, managerial level information and strategic level information. Therefore, the construct of information sharing is represented by the sub-constructs such as order information, operational information, managerial information and strategic information. Based on the research model depicted in Figure 1, this study assumes that: (1) Information sharing positively influences buyer dependence (H1), (2) Information sharing positively influences buyer firm’s trust in supplier firm (H2), (3) Information sharing positively influences buyer firm’s commitment in a relationship with supplier firm (H3), (4) Buyer firm’s trust in supplier firm mediates the relationship between information sharing and buyer dependence (H4), (5) Buyerfirm’scommitmentin a relationship with supplier firm

mediates the relationship between information sharing and buyer dependence (H5).

Figure 1. Research model

4. RESEARCH DESIGN

The survey methodology will be chosen given the context of the study. Empirical data for testing the research framework will be collected via a field survey. The context chosen for this study is the relationship between a manufacturer and its major supplier. The major supplier is the one from which the informant’s company made the largest amount of purchases during the past year. This major supplier served as the referent for all questions in the sample survey of this study. The above setting is selected because the major supplier is the one with whom the buyer is likely to have the most intense interactions and the greatest need as well as opportunity to develop relationship through information sharing.

One second-order constructs and ten first-order constructs depicted in the research model will be measured in this study. The first-order constructs of the research model will be developed and tested using three steps: item generation, pre-pilot study, and pilot study. The research model will be tested using large-scale data analysis.

Items designed to measure the constructs will be generated through a comprehensive literature review. The development of a construct will be based on the adoption of relevant research streams. For example, items designed to measure information sharing will be developed from review of supply chain management and information management fields, and items designed to measure buyer dependence will be developed from review of organization and marketing fields. In the pre-pilot study, these items will be reviewed by the panel assembled by academicians and reevaluated through structured interviews with practitioners who will be asked to comment on the appropriateness of the research constructs. Based on the feedback from the academicians and practitioners, redundant and ambiguous items will be either modified or eliminated. New items will be added wherever deemed necessary.

5. ANTICIPATED CONTRIBUTION

This study focuses on investigating the effects of information sharing on increasing the magnitude of customer dependence. Based on the literature analysis and the empirical study on the causal paths of the effects forming of implementing information sharing services, this study will provide several contributions. First, this study will investigate the effects of information sharing on buyer dependence on the supplier firm. The results can be formed as the foundation of further researches in

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studying the impacts of information sharing on customer relationship marketing. Moreover, the research results of this study also can provide foundation to the further researches in studying the relationship between information sharing and dependence structures. Second, this study will analyze the causal paths of the value forming of implementing information sharing, thus help to answer the question of whether the magnitude of buyer’s dependence on the supplier can be affected by the act of information sharing.

Third, this study will employ a systematic analytical model to investigate the causal paths of the effects forming of implementing information sharing. This model will be tested using large-scale empirical data analysis and the results can providevaluableinformation to supportmanager’sdecision of adopting information sharing policies on their customer relations maintenance programs. Finally, the analytical impact model of information sharing developed in this study will provide firms to know the value of implementing information sharing in partnership building.

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Figure 1. Research model

Figure 1.

Research model p.3

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