From e-Supply Chain Capability Generation to Information
Technology Value Co-creation
A Perspective of e-Business Process
Jing Zhao and Yi Jiang
Center for International Cooperation in E-business, School of Economics and Management,
China University of Geosciences, Wuhan, China
Keywords: e-Business Process, e-Supply Chain Capabilities, Inter-firm IT Resources and e-Supply Chain Value.
Abstract: The firms have engaged in initiatives that link e-supply chain processes (e.g., e-procurement) across
enterprises to create Information Technology (IT) value. However, it is not clear how IT is contributing to
value creation across-organization process. The objective of this paper is to investigate the process from e-
supply chain capability generation to IT value creation through e-business process across-organization. A
model of e-supply chain value is developed to investigate what and how e-supply chain capabilities are
realized by usage of inter-firm IT resources integration and how business value of IT is co-created in multi-
firm environments. The paper tests the model using Structural Equation Modeling (SEM) with data
collected from 196 manufacturers in China. Our results provide theoretical support for a dynamic process
that distinctive e-supply chain capabilities embedded in e-business process lead to process performance first
and then financial performance and network performance. We find that e-supply chain capabilities (ESCC)
realize e-supply chain value for all partners (e.g. supplier and customer) via upstream and downstream e-
business process.
1 INTRODUCTION
Over the last decade, e-business technologies,
specifically the Web, have revolutionized supply
chain design, management, and control. IT
infrastructure, process integration and partner
alignment can be blended with inter-organizational
processes to develop higher-order capabilities for
demand sensing, operations and workflow
coordination, and global optimization of resources
(Barua et al., 2004); (Devaraj et al., 2007); (Rai et
al., 2006); (Wu et al., 2006). The firms have engaged
in initiatives that link e-supply chain processes (e.g.,
e-procurement) across enterprises to create IT value
(Boone and Ganeshan, 2007); (Dong et al., 2009).
Consider the example of Haier Group (a world's
fourth largest white goods manufacturer company
and one of the world’s top 500 companies in China) ,
which has automated and streamlined to seek its best
suppliers in a globally competitive market with e-
procurement platform, and processed customized
orders with B2C platform. The effect of e-supply
chain on Haier can be seen from their cycle times
from sales order to procurement order being reduced,
and from more than seven days in 2000 to less than
one hour in 2002 (Li and Chang, 2004).
Despite the widespread adoption of e-business, it
is not clear how IT is contributing to value creation
in supply chain. There are a number of factors that
we accept as important and necessary conditions in
the chain of IT value creation (Kohli and Grover,
2008). From a resource-based perspective, prior
literature has identified that e-supply chain
capabilities can serve as a catalyst in transforming
IT-related resources into higher value for a firm
(Devaraj et al., 2007); (Rai et al., 2006). The thesis
has expanded to examining complementary
resources, capabilities and other mediating factors in
the chain of IT value creation. However, it is unclear
how IT value emanates from digital capabilities in
across-organization process. It raises important new
issues of co-create value from IT in across-
organization process that cannot easily be addressed
by current IT value research.
This paper investigates the process from e-supply
chain capability generation to IT value creation
through upstream and downstream e-business
process. In this paper, the IT value co-creation in e-
153
Zhao J. and Jiang Y..
From e-Supply Chain Capability Generation to Information Technology Value Co-creation - A Perspective of e-Business Process.
DOI: 10.5220/0004531601530159
In Proceedings of the 4th International Conference on Data Communication Networking, 10th International Conference on e-Business and 4th
International Conference on Optical Communication Systems (ICE-B-2013), pages 153-159
ISBN: 978-989-8565-72-3
Copyright
c
2013 SCITEPRESS (Science and Technology Publications, Lda.)
supply chain is viewed as that new e-supply chain
capabilities (ESCC) drive value co-creation via e-
business processes linked with different partners. We
regard e-supply chain value as business value of IT,
which consisted of process performance, financial
performance and network performance. The model
of e-supply chain value is proposed and tested using
SEM with data collected from 196 manufacturing
firms in China. Our results provide theoretical
support for a dynamic process that distinctive e-
supply chain capabilities embedded in e-business
process lead to process performance first and then
financial performance and network performance. We
find that e-supply chain capabilities (ESCC) realize
e-supply chain value for all partners (e.g. supplier
and customer) via upstream and downstream e-
business process.
2 LITERATURE REVIEW
Traditionally, IT impacts in the context of supply
chain management (SCM) have been investigated
with a focus primarily on specific technologies and
innovations linked with partners, such as e-business
(Boone and Ganeshan, 2007), electronic data
interchange (EDI) (Chatfield and Yetton, 2000), and
other inter-organizational information systems(IOS)
(Iskandar et al., 2001). Recent studies using
Resource-based view of the firm (RBV) as a
theoretical base have focused on the relationships
between resources, capabilities and business value
(Kohli and Grover, 2008). These researches can be
divided in two streams.
The first stream of research suggests that a firm’s
overall e-supply chain effectiveness is determined by
its investment in e-business for creating unique
Internet-enabled capabilities (Barua et al., 2004);
(Dong et al., 2009). For example, Barua et al. (2004)
study firms’ abilities to deploy three resources - IT,
processes, and readiness of customers and suppliers -
to create business value. Their empirical results
show that online informational capabilities have a
positive impact on operational and financial
performance.
The second stream of literature suggests that
firms derive e-business benefits through intermediate
business processes (e.g., e-procurement, CRM) (Ray
et al., 2005). Ray et al. (2005) argue that adopting
the effectiveness of business process as a dependent
variable is a more appropriate way to test resource-
based logic than adopting overall firm performance
as a dependent variable. For these reasons, it is
important to focus on process performance as a
feasible path to e-business value. Also, this
perspective is used for analyzing e-supply chain
integration, e.g., Rai (2006) and Barratt and Oke
(2007).
However, the literature is scarce with studies of
the complex process regarding co-creating business
value of IT in e-supply chains. Prior works lack
research for these intermediate factors forming the
linkage and impacting business value of IT in supply
chain.
3 RESEARCH MODEL
AND HYPOTHESE
In this paper, we use RBV together with e-business
process view to explain how focal firm and partners’
IT resources integrated in across-organization
process applications to create e-supply chain
capability and further gain co-creation value. The
research model of e-supply chain value will be
developed to investigate the process of e-supply
chain capabilities generation and e-supply chain
value creation. We characterize this model with three
dimensions and six constructs. The definitions of
constructs in the model are summarized in Table 1.
These dimensions include Inter-firm IT Resources
Integration, e-Supply Chain Capability and e-Supply
Chain value.
In order to study in depth the process from e-
supply chain capability generation to value creation
through e-business process, we divide the process
into three stages: (1) Generation of e-supply chain
capability; (2) Creating e-supply chain process
performance; (3) Generation of e-supply chain value.
A series of hypotheses are developed to test the
relationships between constructs.
3.1 Creating e-Supply Chain
Capability
In this stage, the generation of e-supply chain
capability (ESCC) is related to usage of inter-firm IT
resources integration via e-business process.
Melville et al. (2004) ague the IT and non-IT
resources and the business processes of
electronically connected trading partners shape the
supply chain ability to generate operational
efficiencies impacts via IT. In this paper, Inter-firm
IT resources integration includes Internal IT
resources integration for focal firm and Partner
Resources for supply chain partners. Concerning
Internal IT resources integration, prior SCM studies
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Table 1: Definitions and constructs in the model.
Construct Definitions References
Internal IT Resources
Integration ( IITR)
The extent to which a firm integrates its Internal -organizational IT
resources (including information systems, employees and managers
knowledge) to construct e-business processes in e-supply chains for
online information sharing and transaction execution across the
value chain.
Melville et al.
(2004)
Partner Resources ( PR)
The degree to which a firm's partners (e.g., suppliers, retailers and
customers) are willing and ready to conduct business or service
activities electronically via e-business processes in e-supply chains.
Melville et al.
(2004)
e-Supply Chain
Capability (ESCC)
The ability that a firm uses e-business technology to share
information and accomplish transaction and coordinate activities
electronically with partners (e.g., suppliers, retailers and customers)
through e-business processes in supply chains (e.g., e-procurement,
e-ordering, and CRM).
In this paper, e-Supply Chain Capability consists of three parts in
upstream and downstream supply chain. They are called e-
Procurement capability (EPC), e-Ordering Capability (EOC) and e-
CRM Capability (CRMC).
Zhao et al.(2008)
e-Supply
chain
value
Process
Performance
IT value at e-supply chain process level and emanates from e-supply
chain capabilities via e-business process. In this paper, Process
Performance consists of three parts in upstream and downstream
supply chain. They are called e-Procurement Process Performance
(EPPF), e-Ordering Process Performance (OPPF) and CRM Process
Performance (CRMPF).
Dong et al. (2009)
Dehning et al.
(2007)
Financial
Performance
(FPF)
Improvement in financial performance attributable to e-supply chain
applications
Barua et al. (2004)
Dehning et al.
(2007)
Collaborativ
e
Network
Performance
(CNPF)
Aggregate performance t of collaborative network in e-supply chain Straub et al. (2004)
have realized that IT technology contribute to e-
supply chain capability(Rai et al., 2006); (Wu et al.
2006), For an organization with a high level of
information systems, it should be able to transmit,
combine and process data from business partners,
such as, suppliers/vendors. As noted by Wu et al.
(2007), the organizational learning ability associated
with IT professional knowledge is positively related
to the use of both coordination and transaction e-
procurement applications capability (Wu et al.,
2007).Together these studies suggest the critical role
of IS integration technology and IS application
knowledge in improving the effectiveness of e-
supply chain capability in their e-procurement, e-
ordering, and CRM. This leads to the following
hypothesis:
H1: Internal IT resources integration in focal
firm has a positive impact on the level of e-
procurement capability.
H2: Internal IT resources integration in focal
firm has a positive impact on the level of e-ordering
capability.
H3: Internal IT resources integration in focal
firm has a positive impact on the level of CRM
capability.
Electronic integration of supply chain processes
across organizations requires the development of IT
resources by both the focal firm and its trading
partners (Melville et al., 2004); (Zhao et al., 2008).
Hence, partner resources support (includes suppliers,
retailers) is considered an external resource to
support process connection (Dong et al., 2009) and
develop e-supply chain capability from collaborative
partner relationship perspective (Dewan et al. 1998).
Even if a firm has the necessary IT applications to do
business online with customers and suppliers, a lack
of partner’s readiness on the part of customers or
suppliers will impede the adoption of the technology
and IT value creation (Barua et al., 2004). Thus, we
hypothesize the following:
H4: Partner resources have a positive impact on
the level of e-procurement capability.
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155
H5: Partner resources have a positive impact on
the level of e-ordering capability.
H6: Partner resources have a positive impact on
level of CRM capability.
3.2 Creating e-Supply Chain Process
Performance
In this paper process performance refers to inter-
organizational IT-based value co-created by e-supply
chain capabilities via upstream and downstream e-
business processes. More and more literatures
suggest that process performance should be
considered as a critical competitive power
measurement in recent SCM studies (Dehning et al.,
2007); (Dong et al., 2009). e-Supply chain capability
can improve process performance in operations by
sharing key planning and schedules information and
coordinating fulfilling orders and customer services
(Dehning et al., 2007); (Gunasekaran and Ngai,
2004a). From e-supply chain process level, it is
optimal perspective to take an in-deep look at co-
creation value emanates from robust collaborative
relationships among firms. Therefore, we propose
the following hypotheses:
H7: e-Procurement capability has a positive
impact on e-procurement process performance.
H8: e-Ordering capability has a positive impact
on e-ordering process performance.
H9: CRM capability has a positive impact on
CRM Process performance.
3.3 Generation of e-Supply Chain
Value
In this paper, generation of e-supply chain value
combines two relationships between process
performance, financial performance and
collaborative network performance. On the one
hand, focal firm can capture effects of e-supply
chain process performance improvement to the direct
overall firm financial performance. On the other
hand, through e-supply chain process integration and
collaboration, focal firm also improves collaborative
network outcomes together with their partners to
gain new competitive advantages.
e-Supply chain can improve financial
performance in operations by coordinating
marketing forecasts, production schedules, and
inbound logistics through the availability of
enhanced informational support for operations
planning and control resulting in reduced levels of
work-in-process and higher capacity utilization
(Gunasekaran et al., 2004b). It may be important to
simultaneously consider measuring the full direct
impact of e-supply chain process use on financial
performance. Therefore, we propose the following
hypotheses:
H10: e-Procurement process performance has a
positive impact on firm financial performance.
H11: e-Ordering process performance has a
positive impact on firm financial performance.
H12: e-CRM process performance has a positive
impact on firm financial performance.
In this paper, co-creation of value focuses on
overall e-supply chain operations effectiveness due
to each firm in this network benefits from such
relationships. Collaborative network performance
can be associated with e-supply chain has recently
been demonstrated by Straub et al. (2004). They
argue that degree-symmetric information sharing and
dependence in e-supply chain are positive related to
networked organizational performance. The greater
the degree of process applications between partners
via e-supply chain, the greater its share of net value
from deployment of the usage. This leads to the
following hypothesis:
H13: e-Procurement process performance has a
positive impact on collaborative network
performance.
H14: e-Ordering process performance has a
positive impact on collaborative network
performance.
H15: e-CRM process performance has a positive
impact on collaborative network performance.
4 RESEARCH METHODOLOGY
4.1 Data Collection
This study used the survey method to collect primary
data from senior IS managers and business managers
of manufacturing firms in China. A five-point Likert
scale (from very well to very bad) was used to
collect most responses. The data collection involved
manufacturing firms engaged in e-supply chain that
had the ability to interact with suppliers and
customers over the Web. During the whole process,
we have sent out 600 surveys and received 233 back.
Ten responses had too many missing data and were
discarded. Twenty-seven companies were discarded
because they didn’t adopt information systems for
SCM except Internet access. There were 196 usable
responses and the usable response rate was about
33%. In the sample, 65% of firms belong to
traditional manufacturing group, such as China
Petroleum & Chemical Corporation (Sinoper),
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156
Shanghai Volkswagen and Honda China. About 35%
firms belong to high-tech manufacturing group,
example include Lenovo, Samsung China, Benq,
Foxconn, Chinabird Huawei and et al. We found no
significant differences of organizational size and
sales in the two groups by using one-way ANOVA.
4.2 Data Analysis
A covariance-based Structural Equation Model
(SEM) analysis was used for data analysis.
Exploratory factor analysis (EFA) was first
conducted using SPSS 16.0 to validate the proposed
factor structures. EFA showed the presence of ten
factors in the data and the factor structures matched
the ones we identified in the research model. The
results of measuring IT related resources and e-
supply chain capability represented two and three
factors solution with 64% and 77% cumulative
percent of variance extracted respectively. These
items employed in multi-level performance revealed
five factors with 85% cumulative percent of variance
extracted. The values of KMO are all above 0.85
with significant Bartlett’s test of sphericity at 0.05
levels. The factor structures suggested by the EFA
match the one proposed in the research model.
Next, confirmatory factor analysis (CFA) was
conducted to check the reliability and validity of the
measurement model using Lisrel.8.72. Construct
reliability was measured using Cronbach’s alpha and
composite reliability. The Cronbach’s alpha ranges
from 0.79 to 0.92 for the 10 constructs, indicating a
high internal consistency (Straub et al., 2004).
Further, composite reliability was evaluated and
found to be similar, based on which we may
conclude that the reliability for these constructs is
adequate (Straub et al., 2004). Convergent and
discriminant validities were examined by both factor
loadings and a correlation matrix. All estimated
standard loadings are significant (p<0.001),
suggesting good convergent validity. All square root
of AVEs were above 0.707 (AVEs were above 0.50),
and they are much larger than all cross-correlations.
In sum, the results indicate good convergent and
discriminant validity.
The research model was tested with Lisrel 8.72,
results are presented in Fig. 1. Several GFI indexes
of the structural model have been widely used in IS
research arena. The normed 2(2 to degree of
freedom) is 2.4, which is within the recommended
level of 3.0Barua et al. 2004). The incremental fit
indices include the normed fit index (NFI), Non-
Normed Fit Index(NNFI), comparative fit index
(CFI), and incremental fit index (IFI), which are all
higher than 0.9. This implies a good model fit (Hu
and Bentler, 1999). Results suggested that the
structural model fit the data adequately.
4.3 Hypothesis Tests
Out of 15, 14 hypotheses are supported in our study;
we also provide an overall validation of the model of
e-supply chain value shown in Fig. 1.
Since our model proposes that e-supply chain
capability(ESSC) are intermediate transferring
capabilities between inter-firm IT resource
integration and process performance, we test these
effects in three upstream and downstream processes
at the same time. In the e-procurement process, only
Internal IT resources integration of a focal firm have
a positive effect on e-procurement capabilities (EPC)
(β=0.64, p<0.001), while partner resources does not
have a significant impact (β=0.12, p>0.05). Thus, H2
is not supported. In the e-ordering process, the
results indicate the Internal IT resources integration
(β=0.61, p<0.001) is more likely to be associated
with the development of e-ordering capability (EPC)
than partner resources (β=0.15, p<0.05). Similarly,
the results also predict the impact of Internal IT
resources integration (β=0.67, p<0.001) and partner
resources (β=0.16, p<0.05) on the generation of
CRM capability (CRMC). Therefore, these results
support the hypothesis that firms have engaged in
integrating inter-firm IT resources together with
partners to create unique e-supply chain capability
through upstream and downstream e-business
processes.
We further tested the e-supply chain process
performance co-create by e-supply chain capability
in upstream and downstream e-business processes.
Hypotheses H7, H8, and H9 are all strongly
supported at 0.001 significance level, demonstrating
that ESSC involving in procurement (β=0.57,
p<0.001), ordering (β=0.66, p<0.001), and the CRM
process (β=0.65, p<0.001) leads to improved
individual process performance respectively.
We also identify the role of process performance
in transforming from e-supply chain capability to
financial performance (FPF) and collaborative
network performance (CNPF). The model shows a
significantly positive linkage between e-supply chain
process performance and financial performance in
the e-procurement (β=0.32, p<0.001) with higher
magnitude and greater significance than in the e-
ordering (β=0.30, p<0.05) and CRM (β=0.14,
p<0.001). Therefore, H10, H11, and H12 are
supported in this study. H13, H14, and
H15 predicted that process performance also would
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157
Figure 1: Structural model results.
impact on collaborative network performance.
5 CONCLUSIONS
The empirical results provide strong overall
validation of causal relationships between the
constructs in the three stages, forming a dynamic
chain among inter-firm IT resources integration, e-
supply chain capabilities and e-supply chain value.
The results indicate that firms use collectively of
inter-firm IT resources to gain e-supply chain
capabilities which via implementing the e-business
process more efficiently and effectively. We argue
that the core competencies of the e-supply chain, as
associated with e-supply chain processes, are
achieved by e-supply chain capabilities, which are as
integrated process enablers between upstream and
downstream processes to realize benefits for focal
firms and all partners (e.g. supplier and customer).
Furthermore, the impact of financial performance
and collaborative network performance are mediated
by process performances in procurement, ordering,
and CRM process. This research expands our
understanding of the dynamics and completeness of
transformation for the e-supply chain
implementation success.
Finally, we want to point out limitations of this
study. Our data relies on a single Asian country.
Sample data from one or more western countries are
needed to further generalize the findings. This cross-
national comparison may reveal the potential impact
of national differences (e.g., national culture and
country-specific e-supply chain practices).
ACKNOWLEDGEMENTS
This research has been supported by grants from the
National Natural Science Foundation of China under
Grant 70172034, 70672064, 71072080.
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