INFORMATION TECHNOLOGY AS AN ENABLER OF SUPPLY CHAIN COLLABORATION: A DYNAMIC‐CAPABILITIES PERSPECTIVE

• Published date: 01 January 2011
• Author: GREGORY M. MAGNAN,CHAD ALLRED,CYNTHIA WALLIN,AMYDEE M. FAWCETT,STANLEY E. FAWCETT
• Date: 01 January 2011
• DOI: http://doi.org/10.1111/j.1745-493X.2010.03213.x

INFORMATION TECHNOLOGY AS AN ENABLER

OF SUPPLY CHAIN COLLABORATION:

A DYNAMIC-CAPABILITIES PERSPECTIVE

STANLEY E. FAWCETT

Georgia Southern University

CYNTHIA WALLIN AND CHAD ALLRED

Brigham Young University

AMYDEE M. FAWCETT

University of Arkansas

GREGORY M. MAGNAN

Seattle University

Despite substantial information technology (IT) investments, many organi-

zations have failed to obtain hoped-for improvements in supply chain (SC)

performance. Therefore, we investigate the mechanisms through which IT

influences SC performance. Specifically, weuse the resource-based view (RBV)

of the firm to ascertain how IT can be exploited to obtain a distinctive SC

advantage. We do this via a multimethod (survey and case-study) approach at

two periods of time. We use a nested structural equation model (SEM) to test

six hypotheses. Likewise, we content analyze interviews to contextualize the

SEM findings. Importantly, we find that investments in IT make their greatest

competitive contribution when they enable a dynamic SC collaboration

capability. The findings provide valuable insight to guide IT investments

designed to improve SC performance.

Keywords: electronic commerce; strategy development; supply chain management; supply

chain performance; survey methods; structural equation modeling; structured interviewing

INTRODUCTION

Over the past two decades, advances in information

technology (IT) enabled the emergence of modern sup-

ply chain management (SCM) (Mabert and Venkatara-

man 1998; Hult, Ketchen and Slater 2004). Michael

Hammer (1990) popularized IT’s transformative role,

arguing that IT made possible the reengineering of work.

Unfortunately, many companies failed to grasp his em-

phasis on how IT is used rather than on IT itself. Over a

decade after he introduced process reengineering, Ham-

mer lamented that fewer than 10 percent of all major

corporations had used IT to transform their value-cre-

ation processes (Hammer 2004). Companies had adop-

ted an IT focus rather than a process focus (Fawcett,

Osterhaus, Magnan, Brau and McCarter 2007). As a re-

sult, they had failed to use IT to leverage complementary

competencies that reside across the supply chain (SC)

to gain competitive advantage (Dyer and Singh 1998;

Frohlich 2002).

Theoretically, IT allows various members of an SC to

share information and coordinate competitive initiatives

(Frohlich 2002; Wu, Yeniyurt, Kim and Cavusgil 2006).

For example, SC leaders like Amazon, Dell, Honda,

Procter and Gamble and Wal-Mart use IT to share real-

time information regarding inventory levels and flow

through rates with key suppliers (Lee 2004; Chopra

and Meindl 2009). Better information sharing should

lead to stronger supplier performance and better SC

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relationships, which promote the ideation and exploita-

tion of unique forms of SC collaboration (Tippins and

Sohi 2003; Lee 2004;Liker and Choi 2004). Research has

shown that SC leaders areusing IT to enable SC business

models that deliver significant performance improve-

ments, including lower costs, faster new product devel-

opment, shorter order fulfilment lead times and greater

supply flexibility and SC agility (Clark and Hammond

1997; Cachon and Fisher 2000; Frohlich 2002; Radjou

2003; Hult et al. 2004; Fawcett, Magnan and McCarter

2008a; Lao, Hong and Rao 2010).

However, despite considerable IT investments targeted

at improving operational performance, many companies

have been unable to replicate the performance results

obtained by SC exemplars. Because they have focused on

the technology itself rather than how it can be exploited

to transform SC operations and relationships (Wu et al.

2006), these companies have been ‘‘disappointed with

the returns from these investments’’ (Jap and Mohr

2002). Ultimately, these companies have bought ad-

vanced technologies, but not used them to build non-

imitable SC competencies that deliver unique customer

value (Barney 2001; Ketchen, Tomas, Hult and Slater

2007).They have failed to understandtwo critical points:

1. IT is a valuable-but-no-longer-rare resource. IT and

supportive implementation services are now available

to any company with the money to acquire them. By

themselves, technology investments can be replicated

by competitors and thus provide only a temporary

competitive advantage (Taylor 2003; Fawcett, Magnan

and Ogden 2007).

2. Although IT is almost ubiquitous, the way IT is used

can enable competitive differentiation. Inimitability

emerges as IT enables unique value-creation opportu-

nities — such as tho se found in coordin ated and col-

laborative SC strategies (Brynjolfsson 1993; Clemons

and Row 1993; Powell and Dent-Micallef 1997; Bar-

ney, Wright and Ketchen 2001; Wu et al. 2006).

To summarize, although exemplar companies have

leveraged IT to change SC practice and obtain dramatic

SC performance improvements, experience shows that

investments in IT per se do not necessarily lead to com-

petitive gains (Richey, Chen, Upreti, Fawcett and Adams

2009). Our research objective is to evaluate the hows

underlying the effective deployment of IT in winning SC

business models and thus explain why some companies’

IT and SCM investments are more successful than those

of their counterparts.

The remainder of this article is organized as follows. In

the following section, we use the resource-based view

(RBV) of the firm to evaluate how IT can theoretically be

used to create SC capabilities and thereby competitive

advantage. We then describe our multimethod research

approach. Next our findings reveal that IT investments

can help create differential returns when they enable the

creation of specific dynamic capabilities. Specifically,

targeted IT investments that promote a dynamic SC col-

laboration capability engender distinctive operational

and firm performance. We conclude with theoretical and

managerial implications as well as limitations and future

research directions.

AN RBV OF IT’S ROLE IN SCM

Although enabled by IT, contemporary SC strategies

emerged as a response to intensifying global competi-

tion. In particular, the success in the early 1980s of Jap-

anese keiretsu-based firms in the consumer electronics

and automobile industries forced managersto reevaluate

their approach to organizing for competitive advantage

(Schonberger 1982, 1986; Hayes and Wheelwright

1984; Womack, Jones and Roos 1990). Managers began

to realize that more intense and collaborative relation-

ships among members of an SC could create differential

advantage and confersupernormal rents to well-executed

SC strategies (Bowersox, Calantone, Clinton, Closs,

Cooper, Droge, Fawcett, Frankel, Frayer, Morash, Rine-

hart and Schmitz 1995; Dyer and Singh 1998). As the

RBV of the firm provides insight into how companies

organize and deploy resources to achieve advantage, we

briefly review RBV’s basic tenets and evolution in the

following paragraphs.

The essence of the RBV is that a firm consists of ‘‘a

collection of productive resources’’ that can be exploited

to create value and advantage (Penrose 1959; Rubin

1973; Wernerfelt 1984). The more valuable and rare the

resources, the greater the advantage the firm may obtain

(Dierickx and Cool 1989). Barney (1991) argued that

because resourcesare heterogeneously distributed among

firms and imperfectlymobile, a firm’s distinctive resource

endowments may lead to persistently superior perfor-

mance. This formalization of RBV led to an intense focus

on acquiring a ‘‘unique’’ resource base.

Over time, this static view of the RBV — that a firm’s

resource base is the antecedent to competitive advantage

— has expanded to focus on a firm’s approach to re-

source utilization (Mahoney and Pandain 1992; Priem

and Butler 2001). Resource possession is a necessary but

not sufficient condition for competitive advantage. The

sufficient conditionis communicated by the word how —

how is the firm organizedto use or exploit its resources to

create unique capabilities and value (Barney 1997; Teece,

Pisano and Shuen 1997)? The RBV thus argues that

as important as a firm’s unique resource base is, it is

more important to develop and configure theseresources

in a way that maximizes their competitive potential

(Eisenhardt and Martin 2000).

Even as the RBV has ‘‘evolved into a dynamic recipe

explaining the process by which these ingredients [a

firm’s resources] must be utilized’’ to deliver competitive

advantage, most research continues to evaluate the

competitive impact of a firm’s valuable, rare, inimitable

Information Technology as an Enabler of Supply Chain Collaboration: A Dynamic-Capabilities Perspective

January 2011 39