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Business technology complementarities: Impacts of the presence and strategic timing of ERP on B2B e-commerce technology efficiencies Elliot Bendoly Decision and Information Analysis Emory University 1300 Clifton Road Atlanta, GA 30307, USA Telephone: (404) 370-6092 E-mail: [email protected] Frederick Kaefer Information Systems and Operations Management Loyola University Chicago 820 North Michigan Avenue Chicago, IL 60611, USA Telephone: (312) 915-7063 Forthcoming in Omega, Intl. Journal of Management Science

Abstract ERP implementations have the potential of significantly complementing the use of business-to-business e-commerce technologies. We consider the sources of this complement by drawing on transaction cost economics, the resource-based view of the firm and the theory of swift even flow. Analysis of 115 firms shows that perceived transactional efficiencies are greater for B2B e-commerce technologies in the presence of ERP, and are in fact magnified when ERP implementation specifically precedes B2B ecommerce initiatives. These findings imply a distinct system adoption strategy for firms pursuing e-commerce opportunities. Keywords: Enterprise Resource Planning; B2B E-commerce; Technology Sequencing; Transactional Efficiency

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1. Introduction Over the last decade, significant advances in information technology have provided the means for organizations to respond much more quickly to the actual state of market demand. The operational structure that organizations use in responding to market demand can effectively be broken into three components: inbound, internal and outbound logistics.

From the perspective of internal logistics, developments in Materials

Requirements Planning and Enterprise Resource Planning (ERP) systems have been prominent.

Inbound logistics have been aided by the prospective use of inter-

organizational technologies such as Electronic Data Interchange and more recently by emerging Business-to-Business (B2B) electronic commerce technologies.

Certain

outbound logistical activities have likewise been supported by B2B electronic commerce technologies, allowing firms to introduce themselves to previously unassociated buyers. Although each of these technologies may be used independently of any of the others, it is possible that having more than one solution would provide more value to an organization than the value provided by each separately. This concept has been recently identified as one of the four major value drivers enhancing the value-creation potential of e-business, known as complementarities [1].

This study investigates the existence of

complementarities between two specific technologies, ERP and B2B e-commerce.

In some cases, the functionality of B2B e-commerce technologies is built into ERP system packages marketed by firms. Examples of such reported capabilities can be found in evolving versions of systems developed by well-established ERP vendors including SAP, Oracle and Peoplesoft, which collectively represent more than half of the

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ERP vendor market by revenue. This portion of the market is also predominantly built upon the business of large multi-national corporations. However, the remaining ERP market, characterized more and more by small to medium sized enterprise (SME) adopters facing a highly fragmented pool of developers, poses a decided contrast. A review of survey findings provided by the American Production and Inventory Control Society (APICS) shows that only 65% of these lesser-known packages are even partially equipped to handle purchase updates via the Internet or EDI, while only 43% are even partially equipped with e-Payment capabilities [2]. These numbers suggest that firms interested in such functionality need to rely on additional application vendors or in-house development efforts; an extremely costly proposition for most SMEs.

One of the primary goals of ERP implementations is to assure a seamless profile of internal enterprise processes [3]. Conversely, one of the primary goals of B2B ecommerce technology implementations is to make inter-organizational communication more efficient and cost effective. Since the effort of responding to market demand often involves both internal processes as well as communication between organizations in a supply chain, opportunities exist for coordinating and/or integrating these processes to achieve even greater benefits than are afforded by each technology independently.

With these ideas in mind, the present study draws on the theory of swift even flow, transaction cost economics and the concept of complementaries to consider how both the mere presence of ERP systems and the relative timing of system implementations can impact the efficiencies of B2B electronic commerce technologies.

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To assess hypothesized effects we analyze survey responses from firms representing both manufacturing and service operations. We show that the potential presence of ERP systems positively impacts future development-based transaction cost economies associated with B2B e-commerce technologies, while additional planning to ensure that ERP implementation precedes B2B e-commerce is backed by incentives associated with communication-based transaction cost savings.

2. Theoretical Background

There is a growing belief that the ultimate benefits of ERP implementations appear only partially through short-term direct considerations, and largely lay in indirect impacts on longer term strategic plans [4]. ERP systems, a term coined by the Gartner Group, are not simply tools that provide singular outputs, but rather infrastructures that support the capabilities of all other information tools and processes utilized by a firm [5]. This has represented a significant deviation from the role of MRP packages, often contained within larger ERP systems, which have traditionally been viewed strictly as tools and not enterprise-wide transactional architectures themselves. ERP systems have further been distinguished by their touted “seamless integration of processes across functional areas with improved workflow, standardization of various business practices, improved order management, accurate accounting of inventory and better supply chain management” [3]. Another common cited functionality of ERP systems has been that of the integration of information technologies relevant throughout the enterprise as well as among those extending beyond the enterprise [6-8]. Therefore the task of specifying or

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becoming familiar with the functionality of an ERP system implies the development of an understanding of both a firm’s internal and external capabilities.

The focused role of integrator that ERP systems have become synonymous with belies their developmental history. Originally, the concept of ERP emerged from interorganizational, rather than intra-organizational interests [9]. This proving too difficult an initial task, early focus soon fell upon the development of internal enterprise oriented technologies. Only more recently has the inter-organizational focus reemerged, with the development of advanced integration-capable B2B e-commerce technologies.

The

integration of these advanced technologies to incorporate inbound and outbound data and analysis to already advanced internal enterprise systems promises to make possible many of the theoretical benefits of supply chain strategies. Figure 1 illustrates the role of these technologies in strengthening vertical relationships. Figure 1: Linkages Provided by Enterprise Technology

Suppliers M arket

A vailability Inform ation

P ulled M aterial

D em and Inform ation B 2B

C orporate E nterprise

ERP B 2C /B 2B

A vailability Inform ation

’s

D em and Inform ation

R eceipt Inform ation D ispatch Inform ation P ulled M aterial

Custom er/Buyer M arket

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Since the use of B2B e-commerce technologies can occur both with regards to upstream procurement and downstream sales activities, it is conceivable that the benefits perceived by alternate usage may differ markedly depending on a firm’s relative position in this framework.

2.1. Swift Even Flow

The benefits of ERP implementation can be categorized by their relationship to three objectives commonly referred to in the Operation Management literature as generating increases in productivity: variability reduction, bottleneck reduction and waste reduction [10]. Schmenner and Swink have referred to the complex implications of the interactions of these three elements in the discussion of what they coin as the theory of swift even flow [11].

According to this theory, as mechanisms aimed at reducing

variability, bottlenecks and wastes are put into place, the underlying productive capability and cost effective potential of a system becomes more and more transparent.

In

particular, this theory proposes that synergies exist in the reduction of variability, bottlenecks and waste such that overall benefits of reducing more than one of these problem sources is greater than the sum of benefits associated with reductions of each in isolation.

As suggested in a recent white paper published by Federal Express, benefits of implementing ERP infrastructure map directly onto the three issues of variability,

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bottleneck and waste reduction outlined by the theory of swift even flow [12]. Further delineation of these benefits comes through viewing ERP implementations both from a “product” and a “process” standpoint. This mapping is summarized in Table 1. Falling under the ERP “product” characteristics are features idiosyncratic to the system developer’s design, version and specific structure of the system relative to existing enterprise operations.

“Process” attributes involve all activities associated with the

implementation process itself, from which the organizational knowledge gains and operational process improvements develop.

Table 1: ERP System Product and Implementation Process Effects

Variability Reduction

Bottleneck Reduction

Waste Reduction

Example Product Effects

Example Process Effects

Common DB: Elimination of redundancy and potential for multi-system data conflicts

Rationalization of Number of Business Procedures: Less uncertainty as to how a transaction will be executed

Standardized Interfaces: Reduction in variance in human-computer and computercomputer processing time Common DB: Tracking of processing times and simplified identification of potential enterprise-wide bottlenecks

Training/Education of Users: Reduced variation in interpretations of corporate goals, operational priorities and transactional procedures Rationalization of Number of Business Procedures: Fewer processes make the identification of bottleneck sources easier, and allow for smoother reactive capacity adjustments

Standardized Interfaces: Significant reduction of time required for transactions, in some cases eliminating bottlenecks

Training/Education of Users: More workers have the ability to recognize bottlenecks

Common DB: Monitoring of specific forms of waste, and prioritization of waste by enterprise-wide cost implications

Rationalization of Number of Business Procedures: Elimination of unnecessary, redundant or wastegenerating business sub-processes

Standardized Interfaces: Allowing easier comparability of inter-departmental sources of waste and hastens treatment

Training/Education of Users: More workers have the ability to recognize waste and future waste generating processes

One of the immediate observations from this framework is the number of tangible benefits that can imply or can be directly associated with transaction cost reductions [13].

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While the transactional benefits posed by this framework are enabled directly by ERP implementation and potentially observable across multiple functions of the firm, these benefits also extend to other transaction oriented systems that may be vitally linked to ERP architectures.

2.2. Transaction Cost Economics

In discussing transaction cost economics, Williamson identifies uncertainty, complexity and information asymmetry as critical sources of transactional inefficiency. Such inefficiency is associated with difficulties in ex ante transaction cost management, forcing additional work such as contract adjustment to occur after business-to-business agreements have been initiated or put into place. Reductions in uncertainty, complexity and asymmetry alluded to by ERP “product” and “process” effects therefore suggest the potential for more effective use of ex ante activities in focused transactional environments [14,15]. This further suggests that inter-organizational transaction systems may prove to be more effective in the presence of ERP technologies.

The theoretical savings alluded to by jointly considering swift even flow and transaction economics in ERP/B2B e-commerce settings can be viewed both from upstream procurement and downstream sales perspectives depicted earlier in Figure 1. From the procurement perspective, recent analytical studies have shown that the integration of such activities as purchasing or preventative maintenance planning within an effective production planning scheme can provide for considerable savings [16,17].

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This integration requires the effective flow of information between planning activities. However, the benefits accruable should not be viewed as limited to intra-organizational sources. For example, although ERP systems are often associated with information control in modern production planning operations, the purchasing element of MRO (maintenance, repair and operations) management necessarily associated with maintenance planning has more recently become a critical target for B2B e-commerce ventures. On-line marketplaces for MRO goods have emerged due to a number of forces including the highly fragmented supplier market, the commodity nature of many MRO goods and the sheer volume of MRO purchases. Subsequently the effectiveness of a firm’s B2B e-commerce efforts should also reflect the theoretical benefits of planning system integration, particularly in the presence of ERP systems.

The purchasing benefits from reducing uncertainty suggested by swift even flow and transaction cost economics are also similar to resource dependency theory arguments [18]. According to such theory, as requirements-uncertainty is reduced, dependency on supplier hierarchies may also diminish.

This reduced hierarchical dependency can

subsequently provide opportunities for greater purchasing leverage and hence lower perunit costs [19]. The “demand-pull” focus of certain supply chain settings, and increases in requirements uncertainty inherent to these settings, suggests that the role of ERPdriven uncertainty reduction should be particularly critical to such purchasing gains.

Although these theorized purchasing benefits may be appealing to firms using B2B e-commerce technologies mainly for acquisition, transactional benefits to firms

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attempting to use B2B e-commerce markets for downstream interaction can also be argued. Specifically if the joint application of swift even flow and transaction cost economics suggests that the presence of ERP systems encourage the bulk of sales contracting to occur ex ante, more efficient (swifter) and effective (cheaper) purchasing options can be provided to prospective buyers, thus encouraging greater market share potential for sellers.

Based on both upstream and downstream B2B application arguments, the following hypothesis emerges:

H1:

B2B e-commerce technologies provide greater levels of transactional efficiency in the presence of ERP systems than in scenarios where ERP systems are not in place.

Although various definitions of B2B e-commerce exist [20-22], we borrow Laudon and Traver’s [23] broad view of these technologies as providing any type of computer-enabled inter-firm trade, including the use of the Internet and other networking technologies to exchange value across organizational boundaries.

Recognizing that

certain value exchanges will differ among various B2B e-commerce forms and participants, hypothesis H1 is designed to apply generally to both buyers and sellers active in B2B e-commerce environments.

Subsequently, specific testing of the

hypothesis should be accompanied by a clear distinction of these roles in order to ensure that appropriate assessments of a subject sample can be made.

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Taking this line of thinking one further step, we consider the implications of timing with regards to ERP and B2B e-commerce technology initiatives. ERP-driven process-change efforts impacts the very way that management perceives of information technology, often resulting in modified planning mechanisms aimed at improving future IT implementations and utilization. At the same time, experience illustrates that the presence of ERP systems (supposedly after some level of business process reengineering has taken place) can provide a particularly effective tool to assist in the planning of reengineering efforts associated with future IT adoption. In fact, according to Soliman and Youssef [24], firms having implemented an ERP system find that their subsequent ability to integrate communication processes provided for a “solid and open basis for global company communication”.

Such a capability is critical to B2B e-commerce

initiatives.

This system-supported integration emphasizes the importance of the bottleneck reduction dimension of swift even flow theory. In the context of ERP, this is critical since the combined efforts of various departments and strategic business units in shortand medium-term planning tasks can greatly impact operational performance [1]. When applied specifically to the transactional activities, for example in order for the purchasing function to maximize its use of B2B e-commerce technical capabilities, interdepartmental and inter-business unit information exchange mechanisms must be put into place to ensure that combined efforts are facilitated. In the presence of an ERP system, the development of norms for such exchange mechanisms is likely to be influenced by

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data access and standardization structures already supported by the ERP technology. To this extent, the existing ERP technology, catering to the complex multi-functional needs of the firm, can then provide a clear foundation for B2B e-commerce technology interfaces with the subset of critical functional areas necessary for usage.

In the absence of an ERP system however, protocols idiosyncratic to a sub-set of purchasing needs may arise that might lack the robustness and standardization for extension into other functional applications. Mismatches between these structures and mechanisms supported by future ERP implementations would reduce the ability to realize complementary functional benefits of these systems [25].

More to the point, the

establishment of B2B e-commerce technologies and protocols in the absence of some form of ERP can fortify the same silos that ERP implementation is designed to knock down. Williamson [14] discusses such fortifications in his references to transactional designs based on attempts to economize on governance structures that may themselves be subject to future change (ie. via ERP driven reengineering initiatives).

Thus the

argument for the importance of technological sequencing motivates a second hypothesis worthy of consideration:

H2:

The implementation of an ERP system before a B2B e-commerce technology implementation provides greater levels of transactional efficiency than does an ERP implementation after B2B e-commerce technology is already in place.

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3. Methodology and Factors

In

assessing

technological

benefits

accrued,

we

follow

Lee’s

[26]

recommendation of making use of tried and accepted instruments from past IT research in otherwise unexplored ERP contexts. Since most of the justification discussed to this point has focused on transactional efficiencies we consider metrics relevant to that issue, such as those suggested by Weill’s study into the relationships between information technology and firm performance [27]. Weill’s work builds on Turner and Lucas’s [28] framework to distinguish transactional efficiency from alternate efficiency considerations (eg. informational and strategic) that can be realized by a firm adopting new technology. The basis of transactional benefits of such IT lay in cost reduction and the classical economic arguments of Williamson [13] discussed earlier.

This concept of transactional efficiency is particularly relevant in the context of this research for two reasons.

First, as illustrated in Figure 1, B2B e-commerce

applications can be used in the value chain as an efficient interface between a firm and its suppliers. Such IT driven efficiency is fundamental to the ability to witness gains posed by a shift from supply chain to demand chain strategic emphasis. Secondly, business decision-makers must justify the benefits of adopting and using a technology before they can receive approval to proceed and be allocated resources. In determining the benefits of adopting and using a technology, analyses of operational cost savings or return on investment (ROI) are commonly used to decide whether or not to make the investment. Tangible claims of transaction cost reductions may be easily incorporated in such

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assessments. On the other hand, claims of strategic and informational importance are often less tangible or drawn thinly across a wide functional range and therefore their impacts are much more difficult to consistently pinpoint for analysis [27, 29].

3.1. Data Collection

In pursuing a measure for transactional efficiency, we turn to a recent study conducted by Mirani and Lederer [30] in which a literature survey of major contributions to IS/IT benefits theory identified 33 potential benefits of IS projects. From an iterative factor consideration of this set, they were able to reduce the number of items useful in capturing the transactional efficiency construct to 10 (See Table 2).

These factors

allowed them to identify several dimensions of transactional efficiency within their sample. Based on their interpretations of the statistical loadings, these factors were referred to respectively as communications, system development and business (personnel / financial capital) efficiency.

A majority of this reduced set (items TE1-TE4, TE7 & TE8) can ultimately be traced back to Smith's [31] guideline for IS benefit measurement. The remaining items were originally drawn from Orli and Tom [32] (items TE5 & TE10) or independently introduced by Mirani and Lederer based on pilot study conducted prior to their investigation (items TE6 & TE9). The following table presents the reduced set of 7-point Likert scale (1= not a benefit, 7=very important) indicators of transactional efficiency posed by Mirani and Lederer [30] and adopted for the present study’s questionnaire.

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Table 2. Items Representative of Transactional Efficiency as Adopted in Survey

Our use of business-to-business e-commerce technology has… TE1 TE2 TE3 TE4 TE5 TE6 TE7 TE8 TE9 TE10

Saved us money by reducing travel costs Saved us money by reducing communication costs Saved us money by reducing system modification or enhancement costs Allowed other applications to be developed faster Allowed previously infeasible applications to be implemented Provided us with the ability to perform maintenance faster Saved us money by avoiding the need to increase the work force Enhanced employee productivity or business efficiency Increased our return on financial assets Sped up transactions or shorten product cycles

Our sample population was drawn from the 186 firms active in the IT Horizons Project, an ongoing effort by university researchers and SME consumer electronics industry members with a mandate to assess the evolution of technology proliferation. This population was advantageous for two main reasons. First, all contacts for these firms were intimately familiar with the use and implementation of B2B e-commerce and ERP technologies in their organizations. For emphasis we also clarified our intended interpretations by providing Mabert, Soni and Venkataramanan’s [3] definition of ERP systems (as opposed to MRP systems) and Lauden and Traver’s [23] definition of B2B ecommerce technology. Second, all firms involved were small- to medium-sized by virtue of their revenue levels and number of employees. Beyond these specifications, the firms did not differ markedly from similar firms in the consumer electronics industry.

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Of these 186 US firms, 98 were involved primarily in manufacturing activities (eg. the assembly of speakers, computer monitors, electrical cables, etc.) and 88 were solely involved with associated service sector activities such as retailing. All firms surveyed operated at revenue levels below $20 million.

Out of these, 59 of the

manufacturing firms and 56 of the service firms already had B2B e-commerce systems in place. Since we were concerned with firms using B2B e-commerce technologies with or without the presence of ERP, this effectively reduced our sample size to 115 firms overall. After rounds of e-mail and phone correspondence, complete responses to the 10 transactional efficiency items and questions on the relative timing of system adoptions from all 115 firms became available for our analysis. To counter risks of common source bias, responses to the transactional efficiency items in the survey were elicited by system users while accounts of system implementation timing were provided by affiliated IS managers. For the transactional efficiency items in Table 2, a 7-point Likert scale as used by Mirani and Leder [30] was implemented. Additional control data including firm size, measured by the number of employees, the estimated number of business partners interacted with via the B2B technology and reported US dollar sales levels, was also elicited from these IS managers. Means, standard deviations and correlations of these variables are provided in Table 3. Due to the skewed nature of the controls gathered, natural-log transformations of these variables, providing distributions indistinguishable from normality by Kolmogorov-Smirnoff tests, are use here.

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Table 3. Descriptive Statistics of Transactional Efficiency Items and Controls

Only a fraction (52%) of these firms possessed both B2B e-commerce and ERP technologies; an issue which we anticipated and which governed our subsequent analysis. Furthermore, by the beginning of the data collection phase, those firms with B2B ecommerce systems had them for no more than 2 years at the most.

3.2. Factor Development

We began our investigation with the use of principle components analysis followed by varimax rotation for the 10 indicators. Given our focus on the application of Mirani and Lederer’s scale in to an inter-organizational rather than a strictly intraorganizational technology, we chose not to overly constrain the results by fixing the number of factors to be extracted. Instead a factor determination criteria of eigen-values

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greater than ‘1’ was applied. Table 4 provides the resulting loading factors from this reduction procedure.

Table 4. Factor Analysis for the B2B e-commerce Transactional Efficiency Items

Four factors were extracted, each loading heavily on the same items in all cases. To emphasize the association of specific items with derived factors, the highest loadings of each row are provided in bold. Two of these appear to genuinely reflect the communication efficiency and system development efficiency sub-dimensions originally observed by Mirani and Lederer [30], with the other two representing an apparent split within what these authors had originally labeled their business efficiency sub-dimension. Nevertheless, our observed split appeared to be logical in that it divided human resource benefits from those gained through other operational concerns. We refer to these two sub-dimensions as personnel and capital (i.e. financial and physical capital) efficiency respectively.

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Although this deviation from Mirani and Lederer’s [30] findings is significant, it should be noted that on a whole the extraction approach was designed to be flexible given our focus on inter-organizational technologies as well as the intra-organizational technologies to which the items were originally applied. Given the greater level of specification utilized in selecting our sample it is not surprising that a finer level of discrimination was possible.

Furthermore, whereas Mirani and Lederer’s delineation of

the transactional efficiency construct was theoretically justified and their items therefore useful in confirmatory applications, their extraction of transactional efficiency subdimensions was exploratory in nature. Since our extraction was not designed to represent theoretical expectations that future studies would also be judged against, there was no reason to attempt to enforce the same structure here. Similarities in our extraction can therefore be seen as fortuitous and perhaps worthy of further investigation in studying inter- and intra-organizational systems, but are beyond the scope of this research.

Lastly, statistical measures derived in the analysis support the validity of our reduction scheme. For example, as reported in Table 4, the percent of total variance accounted for these items was shown to be 62.2%, sufficiently adequate by most accepted standards [33]. This accountability was markedly greater than the 39.1% derived from an enforced confirmatory factor analysis based on a three-factor model. Statistical support such as this encouraged our use of these extractions as the basis for the 4 loadings-based standardized indices used in the analysis to follow (namely communication, system development, personnel and capital efficiency).

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The last consideration prior to formal analysis involved a check for potential structural differences among the population under investigation that could theoretically impair our ability to observe the effects hypothesized. Along with providing information regarding technological adoption and performance, respondent firms also supplied descriptions of their primary business interests and emphasis.

These descriptions,

provided by IS managers, distinguished firms on numerous levels, including whether the majority of their business came in the form of goods fabricated or services rendered. The distinction between firms in the two categories was considered important given the consideration of such a distinction in past studies [34].

In particular, while

manufacturing firms responding to the questionnaire claimed to be using B2B ecommerce technologies predominantly in the role of firms supplying goods to downstream partners, service firms surveyed characterized themselves as using these technologies predominantly in the role of buyers. As pointed out in our earlier discussion of theoretical complementarities between ERP and B2B e-commerce technologies, a distinction of these two types of firms in subsequent analysis is therefore justified since alternative utilizations of B2B e-commerce technology could give rise to potential differences in observed transactional efficiency gains.

4. Analysis and Results

Before formally testing the hypotheses posed for each sub-population of interest, we first consider whether the distinctions between manufacturing and service firms are in

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fact justified from a statistical standpoint. As shown in Table 5, t-Tests comparing indices (based on factor analysis loadings) for manufacturing and service firms showed significant differences at the better than 1% level in the population means of all but communication efficiency. Such differences suggested that alternative mechanisms may be at play in the two sub-populations, a concept which was well in line with Mukhopadyhay’s [34] emphasis on the role that exogenous factors can have on mechanisms of inter-organizational IT adoption and use.

This reflects the relative

positions of manufacturers and service firms in the consumer electronic supply chain, where manufacturers serve as sellers to service firm retailers (buyers) and therefore also reflects the distinctions discussed earlier between B2B e-commerce technology benefits theorized for buyer and seller firms. In consideration of these differences, all subsequent analysis was conducted for both populations separately.

Table 5: Comparisons of Manufacturing and Service B2B e-commerce Transactional Efficiency

A further check considered the differences within these populations with regards to specific control variables.

Such analysis involved additional t-Test comparisons

among the firms distinguished by alternate system implementation sequences. Firm size, the number of downstream business partners, sales volume and profit level did not prove 21

to significantly differ among firms with and without ERP, or those with ERP before or after other technologies.

4.1. Complementarity of ERP

The evaluation of H1 involved the consideration of differences in B2B ecommerce transactional efficiency between firms with and without ERP systems also inhouse. In particular, it was hypothesized that firms with ERP systems would show higher levels of efficiency related to B2B e-commerce technology use.

In the case of

manufacturing firms, the sub-populations to be compared consisted of 26 firms using B2B e-commerce technologies in the absence of ERP and 33 firms with both technologies in-house. For service firms, the comparative sub-populations were 29 firms without ERP and 27 firms with both technologies.

To ensure that the use of t-Tests for comparison purposes would be appropriate, Kolmogorov-Smirnoff tests for normality were performed for each of the four composite factors as were tests for equality in variance. No significant deviations from normality or differences in variation were detected at the 5% level. Results of the subsequent mean comparison t-Tests for both manufacturing and service categorized firms are provided in Table 6.

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Table 6: Comparisons of B2B e-commerce Transactional Efficiency Dimensions for Firms With or Without ERP systems

Communication System Development Personnel Capital

ERP Presence With ERP Without ERP With ERP Without ERP With ERP Without ERP With ERP Without ERP

Manufacturing Firms Mean SD Sig 0.13 0.09 0.027 -0.41 0.09 -0.24 0.13 0.023 -0.44 0.12 -0.25 0.37 0.354 -0.87 0.32 0.25 0.24 0.037 -0.83 0.22

Mean 0.29 -0.32 0.30 -0.27 -0.52 -0.58 -0.27 -0.28

Service Firms SD 0.35 0.38 0.28 0.30 0.40 0.38 0.26 0.31

Sig 0.021 0.037 0.485 0.436

For both manufacturing and service firms, B2B e-commerce communication and system-development efficiency ratings are significantly higher when ERP systems are in place. This suggests that firms with both ERP and B2B e-commerce technologies inhouse have the capacity for smoother correspondence processing and more cost effective ramp-ups in future technologies than those without ERP. Findings with regards to the system-development sub-dimension are particularly interesting since they suggest synergies that may exist between firms and their partners in technology development may be significantly affected by the presence of ERP systems possessed by either party.

We also observe that B2B e-commerce capital efficiency ratings are higher with ERP for manufacturing firms lending additional partial support for H1. The significance of an ERP system role here, predominantly with respect to manufacturers, is perhaps more intuitive given the accounting and materials planning capabilities that form the foundation of many of these systems. The personnel efficiency sub-dimension was not shown to be significant in either case. As a check against possible low power effects due to the small sizes of the separate samples, we also conducted a pooled analysis of the

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manufacturing and service firms.

While communication, system-development and

capital efficiency differences between ERP and non-ERP scenarios remain significant, personnel efficiency still failed to show significant differences in the presence of ERP. The suggestion from this finding might be that the implementation of ERP may not lead to perceptions of greater labor productivity by users since it is often accompanied by the need for extensive retraining and ambiguous shifts in workload.

4.2. Benefits of an ERP Foundation

The evaluation of H2 represented a sub-set analysis of the population considered in H1. Specifically, only firms with both B2B e-commerce and ERP technologies were considered in order to test the impact of adoption timing on transactional efficiency. This resulted in a substantial reduction in independent population sizes available for statistical comparison. For manufacturing firms, analysis was limited to the comparison of 12 firms that had adopted ERP prior to B2B e-commerce initiatives, and 21 that adopted ERP afterwards.

For service firms, the population sizes were more unbalanced, with 7

complete responses from firms adopting ERP prior to B2B e-commerce and 20 adopting ERP afterwards. Again Kolmogorov-Smirnoff tests were used to check for the presence of non-normality and differences in sub-population variances that might compromise the results of t-Test comparisons. No significant violations from these assumptions were detected at the 5% level. Table 7 provides a summary of the subsequent comparisons.

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Table 7: Comparisons of B2B e-commerce Transactional Efficiency Dimensions for Firms Adopting ERP Before or After B2B e-commerce

Communication System Development Personnel Capital

Timing ERP Before ERP After ERP Before ERP After ERP Before ERP After ERP Before ERP After

Manufacturing Firms Mean SD Sig 0.57 0.17 0.014 -0.20 0.16 -0.16 0.36 0.192 -0.38 0.32 -0.55 0.34 0.839 -0.30 0.33 0.58 0.15 0.037 0.20 0.13

Mean 0.82 -0.06 0.63 0.28 0.55 0.64 0.34 0.21

Service Firms SD 0.08 0.09 0.32 0.45 0.37 0.57 0.30 0.16

Sig 0.016 0.110 0.213 0.323

Similar to the previous set of comparisons, B2B e-commerce communication efficiency ratings also appear to be effected by the timing of ERP adoption. These ratings are higher when ERP is implemented before B2B e-commerce initiatives are begun. As suggested earlier, informal communication structures aligned with pre-ERP B2B e-commerce use may be a root cause for this distinction. Along with a second observation of elevated B2B e-commerce capital efficiency ratings, this represents partial support for H2 and suggests that alternate cost savings opportunities are the direct result of timing for manufacturing firms. Lack of significant differences among service firms prevents a similar statement to be made regarding H2, though this may be due in part to the small sample sizes available and relatively low power of such tests.

System-

development and personnel efficiency were not significant in either case. Pooled analysis of the manufacturing and service populations failed to show significance in either of these issues, though communication efficiency and capital efficiency did again appear to significantly differ between pre- and post-ERP implementations.

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5. Conclusions

This research has attempted to link the efficiencies of inter-organizational B2B ecommerce technologies to the benefits accrued through intra-organizational ERP system adoption and implementation timing. Although many practitioners and academics might intuitively speculate that some form of complementariness would exist between ERP and B2B e-commerce technologies, no formal framework for these linkages has been examined empirically until now. Backed by our consideration of existing theory, our study has provided empirical evidence supporting both the existence and specific nature of the benefits that have been observed. Specifically, our findings suggest that both the mere presence of ERP systems and the strategic sequencing of ERP implementations prior to B2B initiatives can significantly increase transactional benefits made possible by B2B e-commerce technologies.

Furthermore, benefits do not occur across all

transactional dimensions considered for both manufacturing and service firms suggesting that more or less attention should be applied to specific areas when cost justification and ROI assessments are made.

The first of the areas in which transactional benefits is observed in our analysis is with regards to system development cost reductions provided by B2B e-commerce technologies. When an ERP system is simultaneously present, these benefits increase for both manufacturing and service firms.

Subsequently, firms that also possess ERP

capabilities face greater cost reduction incentives when considering the future modification of B2B e-commerce technologies or development of additional systems.

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A second manifestation of ERP-driven transactional benefits comes with regards to communication cost savings of B2B e-commerce technologies. When ERP is in place, particularly when implemented prior to B2B e-commerce initiatives, these benefits seem to increase. Improvements in capital efficiency was shown to be associated with ERP presence and pre-B2B e-commerce technology implementation was as well, though only for manufacturing firms. This distinction between manufacturing and service firms might be justified if ERP benefits to this sub-dimension reside predominantly in the product cycle function, where service firms may be only indirectly involved.

However, the distinctions observed between manufacturer and service firms may also stem from the greatest limitation of the present study; specifically the relatively limited sample size over which a fraction of our analysis was performed. Unfortunately, as with most studies of emerging technologies, this limitation was predominantly due to the simple lack of firms capable of providing input regarding the use of these new technologies, particularly in tandem. The tradeoff of course is between waiting for additional experiences to come to light and risking the loss of importance with regards to the impact that early findings can provide. Future work to lend greater verification to the operationally based hypotheses is already in progress and further encouraged for other researchers to pursue.

An additional line of future research involves the consideration of other forms of system complementarities. For example, the presence of B2B e-commerce initiatives

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implying a greater ability to cover shortages, and hence greater availability at lower cost, may in turn imply a greater ability to react to consumer service needs only recognized by B2C systems. Similarly an e-commerce “B2B before B2C” argument might follow from the idea that experience with B2B e-commerce systems imply a greater understanding of incoming resource availability which in turn leads to better understanding of exactly what customer services can be improved and how. Subsequently, this awareness can lead to a specific design or selection of a B2C initiative aimed at a more appropriate customer relationship management strategy. Though these are nothing more than speculations at this point, they certainly provide interesting avenues to pursue in the future for researchers.

Lastly, it is not difficult to imagine that some of the “ERP before B2B” ecommerce benefits observed in the study would fade with time.

Given enough

experience with both systems, firms would likely overcome initial performance barriers and enjoy other unobserved benefits. Some may arise from alternate efficiency measures originally posed by authors such as information efficiency and strategic efficiency [13,27,28]. The consideration of such ideas might require more complex organizational models, longitudinal data and a greater sample size than is currently available, but remains an intriguing possibility for future work.

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