The business value of digital supply networks: A program of research on the impacts of globalization

Abstract

The “Networked Economy” describes alliances of firms that manage globally distributed supply networks. In the best of all worlds, this interactive flow of information among member firms will result in efficient and effective balance of supply and demand. Unfortunately, supply networks suffer from poor and inexact information, and, in the worst case, information is unavailable where and when it is needed. Such entropy creates errors and limits responsiveness of processes leading to situations where there is too much or too little inventory at a given stage in a supply network. These complications are exacerbated across transnational supply chain networks. This paper offers theoretical perspectives, a case study, and outline of a research proposal to help address these challenges and develop insights into the best practices of transnational digital supply networks. High level questions include: What are the defining characteristics of high performing digital supply networks? How does information sharing impact the error and responsiveness of supply network processes and, consequently, supply network performance? How do international outsourcing practices affect network outcomes? These questions are theoretically examined and used to formulate specific hypotheses. An initial investigation of this theoretical formulation is conducted using a case study approach of a global plastics supply network. We propose a program of follow-up empirical work based on a broad field study of high performing supply networks. After a rigorous process for developing the instrumentation through semi-structured interviews, we expect to gather information about over 300 network configurations. As initial empirical evidence for going beyond dyadic exploration of supply networks, we present a case analysis of a plastic industry supply network, the Omnexus electronic trading network. In this analysis, we show how network externalities lead to more efficient flows of information and to more dynamic responses. The overall performance of all firms participating in this network should be enhanced over time. The major contribution of these ongoing studies will be new theoretical and empirical insights into the pathologies and metabolism of global digital supply networks. Specifically, we intend to delineate externalities of supply networks that are not embraced by exclusively dyadic perspectives, as well as the salient factors that complicate the interaction of supply network behavior across national boundaries. We will develop, test and measure novel constructs such as networked organizational performance and error amplification, unveiling systematic knowledge about the relationships between these factors across socio-geographic regions.