How Do Suppliers Benefit from Information Technology Use in Supply Chain Relationships?

Abstract

Supply chain management systems (SCMS) championed by network leaders in their supplier networks are now ubiquitous. While prior studies have examined the benefits to network leaders from these systems, little attention has been paid to the benefits to supplier firms. This study draws from organizational theories of learning and action and transaction cost theory to propose a model relating suppliers' use of SCMS to benefits. It proposes that two patterns of SCMS use by suppliers-exploitation and exploration-create contexts for suppliers to make relationship-specific investments in business processes and domain knowledge. These, in turn, enable suppliers to both create value and retain a portion of the value created by the use of these systems in interfirm relationships. Data from 131 suppliers using an SCMS implemented by one large retailer support hypotheses that relationship-specific intangible investments play a mediating role linking SCMS use to benefits. Evidence that patterns of information technology use are significant determinants of relationship-specific investments in business processes and domain expertise provides a finer-grained explanation of the logic of IT-enabled electronic integration. The results support the vendors-to-partners thesis that IT deployments in supply chains lead to closer buyer-supplier relationships (Bakos and Brynjyolfsson 1993). The results also suggest the complementarity of the transaction-cost and resource-based views, elaborating the logic by which specialized assets can also be strategic assets.