Virtual SCM Impact on E-Business Performance: The European Case

There is no doubt that the Internet represents a business challenge for companies (Teo & Pian, 2003) and that the content of the World Wide Web is useful to millions (Arasu, Cho, Garcia-Molina, Paepcke, & Raghavan, 2001). The estimation of the extension of the web has been the focus of several empirical studies (Bar-Yossef, Berg, Chien, Fakcharoenphol, & Weitz, 2000; Bharat & Broder, 1999; Lawrence & Giles, 1998, 1999). Although there are some differences among findings, most studies indicate that over a billion pages are currently available on the Internet. According to Teo and Pian (2003), nearly 95% of all major companies now have a website.In the electronic commerce age, major challenges facing corporate management in regards to maintaining competitive advantage through several processes include: improvements in production flows, establishment of strong relations with all stakeholders, and the acquisition and application of knowledge, among others (Porter, 2001). In recent decades, organizations have begun to realize the importance of closely managing activities of the supply chain in order to create additional value, which can be grounds for significant competitive advantages. Much research has emerged from the logistics/ distribution and marketing fields as a result, complemented by studies carried out in the information technology field (Nagurney, Loo, Dong, & Zhang, 2002). In light of mounting research, SCM has acquired the status of a generic management concept comprising the systemic implementation of processes that allow the development of competitive advantages and the profitability of firms through the integrated management of distribution channels (Svensson, 2003).Since the 1990s, driven by academic research and organizational practices developed around the concept of e-business, SCM has gained new importance, allowing the modification of the concept into the virtual supply chain management (VSCM). Physical and virtual markets have different intrinsic value systems that must be understood in order to leverage the benefits of the virtual value chain. However, both chains must be managed simultaneously in order to be effective and productive (Rayport & Sviokla, 1995). Although marketing researchers and information system investigators have studied supply chain management to some extent; there are still few conceptual bases available to assess the contribution of supply chain management (SCM) to business success. When analyzing the online performance of companies and the implications of virtual SCM application, these assessment weaknesses assume a major role.The goal of the current study was twofold: (1) to determine whether contextual variables have any effect on SCM adoption level, and (2) to identify the nature of the relationship between VSCM and e-business performance. For this purpose, two sets of propositions were developed: the first relies on exploring the nature of the influence of contextual variables on the adoption of SCM by firms operating in an Internet environment; the second is based on the relationship between e-business success and VSCM initiatives. Since the first is set on the level of adoption of SCM, we examine the contextual aspects involved with firms’ Internet presence. Given the ordinal nature of the dependent variable, the ordered probit model is suitable. Therefore, using a probit model, we verify the influence of contextual variables on SCM adoption. According to our second aim, which was to establish a measurement framework to fill the current gap in research and provide a better understanding of the critical elements of the virtual supply chain and its implications on e-business, a structural equation analysis was performed using a sample of 360 European firms.The framework identifies metrics that can be used to evaluate the impact of virtual supply chain management on business performance. The proposed research model tests four hypotheses: the first is related to the impact of contextual variables in SCM adoption; the second is related to the impact of virtual supply chain management in firms’ performance, and the third and fourth are in regards to the impact of two dimensions in virtual SCM, referenced in literature as critical to firms’ success.In general, our findings support the conceptual framework previously presented, although some of the relationships found were weaker than expected. The results show that the data support our conceptualization for the VSCM construct and allow us to conclude that implementation of a VSCM system has a positive impact on e-business performance. Also, the results support the assumption made regarding the influence of contextual variables on SCM adoption level.This research and its findings will be useful for firms intending to emulate the application of virtual supply chain management, giving insights to managers about the influence of different components of VSCM in e-business performance. The present study advances knowledge on the nature of the relative importance of different components of Internet-based supply chain management as drivers of e-business performance. Some useful preliminary insights are produced, leaving, however, a considerable number of issues for future research, including the possibility of extending the investigation in order to consider the impact of virtual supply chain management in terms of competitive strategy and operational effectiveness. Similarly, this study could be expanded to compare firm performance in e-business versus non-virtual business activities.