An Empirical Investigation of Complementarity in IT-Enabled Supply Chain Initiatives

Abstract

Advances in information technology (IT) have enabled increased information integration across firms, which can potentially lead to higher operational efficiency. In this paper, we build upon prior literature in information systems (IS), supply chain management, economics and strategy to posit that due to inter-firm interdependence and coordination costs, successful information integration requires concomitant improvements in joint planning and synchronized processes across firms. Using a dataset involving 870 firms, we develop a test to assess the potential complementarity between information integration and inter-organizational coordination mechanisms, and find that in tandem with coordination, information integration results in a significant positive impact on operational efficiency. Recognizing that trust is potentially endogenous in inter-organizational relationships, we examine the impact of IT-enabled inter-firm processes that foster trust, and study the impact of trust on the joint impact of information integration and coordination on supply chain performance. Incorporating a correction for self-selection, we find that trust has a positive influence on the joint effect of information integration and coordination. Our findings offer insights regarding organizational processes that need to be in place when firms undertake information integration initiatives.