An investigation into the role of IT integration, relationship predictability and routinization in interfirm relationships: From the structuration perspective
Research highlights
►This study draws on the structuration perspective to explore several missing links between IT integration and firm performance. ► We find that firms should integrate their IT with customer firms to improve the predictability of their business relationships, which in turn promoting relationship reciprocity and stability. ► Although predictability positively affects reciprocity and stability, more routinized interactions with customers reduce such positive effects. ► Increases in reciprocity and stability lead to better firm performance derived from a given interfirm relationship.
Introduction
In the literature, some research suggests that effectively managing customers is made possible through information, technology, and applications that are used to foster the integration of processes, people, operations, and capabilities (Bohling et al., 2007, Payne and Frow, 2005). Hence, it is not surprising to see the use of information technology (IT) to support relationship management, which surfaces as a popular business strategy (Becker et al., 2009, Molloy and Schwenk, 1995). For example, it has been proposed that the investment and integration of IT enhances customer service, perceived quality (Clemons & Weber, 1990), and firm performance (Wu, Yeniyurt, Kim, & Cavusgil, 2006). As a result, it is also not surprising that firms from the United States alone, for instance, invest over $400 billion annually in IT (Ward & Zhou, 2006).
Defined as any form of technology that “creates, captures, manipulates, communicates, exchanges, presents and uses information” to foster collaboration with partners (Ryssel, Ritter, & Gemunden, 2004, p. 198), IT is sometimes heralded as a key variable in supply chain management (Wu et al., 2006). However, many studies provide mixed performance implications (Brynjolfsson & Hitt, 1996). For example, an event study concludes that IT investments do not improve the net present value of a firm (Dos Santos, Peffers, & Mauer, 1993). Some research, nevertheless, indicates that although IT influences performance, its effect must work through certain organizational structures (Bharadwaj, 2000), supply chain capabilities (Wu et al., 2006), or interfirm collaborations (Sriram & Stump, 2004), among others (Kim & Lee, 2010). Consequently, researchers and practitioners are hoping that more conclusive findings and clearer paths to bridge the gap between IT and performance will emerge (Becker et al., 2009, Ciborra, 2006, Melville et al., 2004).
In an effort to examine the link between IT and performance, prior research, for example, uses the process-oriented view to investigate how IT affects intermediate business activities, which in turn influences firm performance (Barua, Kriebel, & Mukhopadhyay, 1995). Some studies use organizational learning theory (Sanders, 2008) and investigate the extent that exploration and exploitation mediate the influences of IT collaboration on firm performance. Other research that draws on the resource-based view (Barney, 1991, Wernerfelt, 1984) shows that firms with superior and non-replicable IT resources have a competitive advantage because such resources are considered rare, non-substitutable, inimitable, and valuable drivers of firm performance (Tippins & Sohi, 2003).
Despite the contributions of previous studies, the role of IT remains unclear and its impact on performance is still not understood. Some researchers argue that it is not IT itself that contributes to the bottom line of a firm; rather, the key lies in how a firm can utilize and take advantage of integral IT with its strategic partners that matters (Kim & Lee, 2010). Because integrated IT allows the firm to easily coordinate with its customers, in this research, we focus on IT integration in the interfirm relationship. IT integration reflects the extent to which a firm integrates and embeds its information systems and technology into its customer relationships and interactions (Clemons and Row, 1992, Ward and Zhou, 2006). To shed light on the performance implications of IT integration, which is underpinned by human–IT interaction dynamics, we expand prior conceptualizations and incorporate a structuration theory perspective (Bostrom et al., 2009, DeSanctis and Poole, 1994, Giddens, 1979, Giddens, 1984, Orlikowski, 1992, Pozzebon, 2004).
In particular, this study has three primary objectives. First, a large body of research on interfirm relationships has built on transaction cost analysis (c.f., Rindfleisch & Heide, 1997), and yet it ignores the social interactions and interpretations of IT to construct an interfirm relationship (Orlikowski, 1992, Orlikowski and Robey, 1991). The structuration perspective, in contrast, provides an alternative theoretical lens to complement existing literature to advance our understanding of interfirm interactions (Pozzebon, 2004).
Further, in the context of interfirm relationships, for instance, the use of IT continues to show that IT integration increases coordination and communications, yet the sequential order of how IT can be translated into firm performance is not fully understood. Some existing IT research builds on structuration theory and examines IT-mediated shifts in interfirm relationships (e.g., Jarrahi, 2010, Rosenbaum and Shachaf, 2010). Because structuration theory is very abstract in nature (Jones & Karsten, 2008), this research stream often uses case studies and their findings are less conclusive (Coopey et al., 1998, Feldman, 2000, Molloy and Schwenk, 1995). Thus, the second and third objectives of this study are to develop constructs to manifest the tenet of structuration theory and to empirically examine how they serve to link IT integration to firm performance.
We define firm performance in a focused, fine-grained sense as the financial performance derived from a specific customer after a focal firm has integrated IT with that particular customer firm. This study sets itself apart from most previous research that relies on the structuration perspective by adopting a quantitative rather than a qualitative or conceptual approach (for review, see Bostrom et al., 2009) and by developing new constructs to illustrate the metaphor of the theory in the context of a strategic interfirm setting (Pozzebon, 2004).
In the following sections, we review the literature on the structuration perspective and build hypotheses regarding the variables that enable IT integration to enhance firm performance. Hypotheses are tested on data from managers of 152 firms and the results largely confirm our premise. We conclude with implications and directions for future research.
Section snippets
Conceptual framework and hypotheses
Giddens, 1979, Giddens, 1984 theory of structuration suggests that all human actions are performed within a pre-existing social structure and that social structures are created and shaped through the recursive interactions between institutional structures and individual actions. Structuration is the process where existing rules and resources are put into practice to create new rules and resources (Giddens, 1979). According to the theory, the structure of signification, the structure of
Sample and data collection procedures
Since this research requires intense interfirm interactions facilitated by IT, we chose to study industrial service providers. The literature suggests that industrial service exchanges are characterized by close contacts between customers and service providers (Boulding, Staelin, Ehret, & Johnston, 2005). Our initial sampling frame included a commercial list of 1500 business service providers that included information of firms that operated in various business service sectors. Preliminary
Results
A structural equations model (SEM), without the moderator of routinization, was estimated to assess the effects shown in Fig. 1. As reported in Fig. 2, the model provided a good fit to the data (χ2 = 106.36, d.f. = 82; CFI = .98; TLI = .97; RMSEA = .044). In support of H1, IT integration positively relates to relationship predictability (b = .25, p < .05). Relationship predictability positively relates to reciprocity (b = .34, p < .01) and stability (b = .52, p < .01), supporting H2a and H2b. Reciprocity (b = .23, p <
Discussion, implications, and conclusion
With the growing access to IT, it is crucial that firms know how to effectively implement IT investments and use IT as a means to create relationships with customers to achieve greater firm performance (Becker et al., 2009). We build on extant literature and incorporate the structuration perspective (DeSanctis and Poole, 1994, Giddens, 1979, Orlikowski, 1992, Whittington, 1992) to suggest that managers should use IT integration to develop predictability in customer relationships so as to
Conclusion
Collectively, we reaffirm the contribution of structuration theory to our understanding of IT use in the interfirm literature (Molloy and Schwenk, 1995, Pozzebon, 2004, Wu et al., 2006). Taking the view of interactionism (Whittington, 1992), our findings suggest that managers should use IT integration to better understand customers. This can be done through maintaining an integrated IT platform with customer firms to facilitate real time interactions and data access. We encourage managers to
Acknowledgments
We thank Ashley Bush, Peter LaPlaca, and three anonymous reviewers for their helpful comments.
Ruby P. Lee is Associate Professor of Marketing at the College of Business, The Florida State University. She holds a BSW (Hons) from the University of Hong Kong, an MPhil from the Chinese University of Hong Kong, and a PhD from Washington State University. Her current research interests include innovation in strategic alliances and between headquarters and their foreign subsidiaries, organizational learning and knowledge management, and strategic and financial implications of marketing
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