The Impact of Power on Firm's IT Infrastructures Integration Intention for SCM

While IT infrastructures integration (ITII) along supply chains helps enhance chains’ efficiency and effectiveness, the lack of ITII is still one of the critical failure factors for supply chain management. As such, it is imperative to understand the drivers for ITII adoption. Based on the perspective of social network, we derive a model to examine the effects of dominant firms’ mediated and non-mediated power on partner firms’ intention to integrate IT infrastructures across the supply chain. In particular, we examine the mediating effect of target firms’ trust and perceived institutional pressures on the relationship between dominant firms’ power (i.e., mediated and non-mediated power) and target firms’ ITII adoption intention. Results from a survey show that the target firms’ trust toward their partners and their perceived institutional pressures mediate non-mediated power’s influence, while trust mediates the effect of mediated power on ITII adoption intention. Contributions and implications of this study are discussed. Introduction IT infrastructures integration (ITII) for SCM enables firms to enhance their efficiency of interacting and coordinating supply chain activities with partners with the objective of improving firm performance (Chung et al. 2005; Rai et al. 2006). The integration involves “the transformation of fragmented, functional, silo-oriented supply chain processes to integrated, cross-functional inter-firm supply chain processes.” (Rai et al. 2006, P238) This transformation allows firms to derive benefits from their IT usage, such as real-time information flow and improved activity coordination, which cannot be gained from fragmented IT infrastructures (Malhotra et al. 2005; Rai et al. 2006). However, although ITII for SCM can offer great potential benefits and enhance operation efficiency (Chung et al. 2005; Rai et al. 2006), the lack of ITII is still one of the critical failure factors for supply chain management (Sahin et al. 2002). This seems to be inconsistent with the profit-maximization principle of organizations. To unlock the mystery, we need to look beyond the perspective of economics, such as Transaction Cost Economics (Williamson 1985). Indeed, from the social network perspective, an inter-organizational relationship does not depend solely on its cost-efficiency (Hart et al. 1997; Pfeffer 1981). It can be defined and shaped by a social network within which firms are embedded (Gulati 1998). Hence, we use the social network perspective as a lens to study the factors affecting a firm’s predisposition to integrate their IT infrastructures for SCM. According to the social network perspective, an organization’s beliefs, feelings, and behaviors can be affected by the social structure of relationships around it (Scott 2000). Hence, more and more researchers have incorporated power within social networks in their research models when studying the adoption of innovation in general and information systems in particular (Jasperson et al. 2002). Many of them have identified the significant role of power in firms’ IS related decision making (e.g., Allen et al. 2000; Chwelos et al. 2001; Hart et al. 1997; Iacovou et al. 1995; Premkumar 2003; Premkumar et al. 1995; Saunders et al. 1992). However, in the IS discipline, most research treats power as a simple construct and do not differentiate its different forms (e.g., Chwelos et al. 2001; Grover 1993; Iacovou et al. 1995; Premkumar et al. 1995). This limits our understanding of the role of power in firms’ IS related decision making. The different types of power can lead to different, even opposite results: some incur conflicts and damage firms’ cooperation, while others increase partners’ satisfactions and willingness to cooperate (Hart et al. 1997). In addition to power, researchers have identified institutional pressures and trust as two other significant social network factors influencing firms’ ITII adoption (e.g., Chwelos et al. 2001; Hart et al. 1997; Hart et al. 1998; Khalifa et al. 2006; Lai et al. 2006; Teo et al. 2003). According to these studies, submitting to institutional pressures may improve firms’ legitimacy and then enhance their capabilities to gain resources and social support, and establishing high level inter-organizational trust can enhance firms’ tolerance to risk and promote inter-organizational cooperation. Based on the social network perspective, we propose a theoretical framework on how a dominant firm’s (DF) power (mediated and non-mediated power) impacts a target firm’s (TF) ITII intention. As markets become more competitive, a simple, direct and heavy-handed use of power is no longer suitable for managing inter-organizational relationships (Brown et al. 1995). Especially, firms’ interpretation and reaction to partners’ power are affected by other social network factors. Thus, in the current study, we contend that a TF’s perceived institutional (i.e., coercive, normative) pressure and trust mediate the relationship between a DF’s power and the TF’s ITII. The research model is tested and supported by data collected with executives in China. This paper is organized as follows. In Section 2, we review relevant extant literature. In Section 3, we derive our research model and propose research hypotheses. In Section 4, we describe research methodology and present our data analysis results. The final section is our discussion and conclusion of the current study. Literature Review IT Infrastructures Integration for SCM An IT infrastructure refers to “the base foundation of the IT portfolio (including both technical and human assets), shared through the firm in the form of reliable services.” (Broadbent et al. 1999, P163) According to this definition, IT infrastructures integration for SCM then is identified as “the degree to which a focal firm has established IT capabilities for the consistent and high-velocity transfer of supply chain-related information within and across its boundaries.” (Rai et al. 2006, P231) Much more than individual physical components, an integrated IT infrastructure can efficiently support firms achieve operational efficiency via the real-time information sharing and consistent coordinate activities (Rai et al. 2006). It also can help firms cope with uncertain and complex environments with the electronic interdependence and mutual adjustment (Bensaou et al. 1995). The great potential benefits of ITII for SCM are attractive to firms and motivate them to adopt such integration. Yet, such integration is not all successful. Thus, highlighting benefits is not sufficient to promote firms adopt ITII for SCM. Under this condition, understanding what and how factors affect firms’ intention to adopt ITII is important. The extant literature suggests that we can study the firm’s ITII from the perspective of social network, which suggests that power, trust and institutional pressures are the major factors affecting the collaboration between organizations. The Use of Power Power is defined as a firm’s capabilities to influence another firm which dependents on its resources to act as it desired (Hart et al. 1998). French and Raven (1959) and Raven and Kruglanski (1970) have identified six types of power sources: coercion, reward, legitimate, expert, reference, and information. Brown et al (1995) classify these sources into mediated power and non-mediated power, they consider such classification offers a more desirable method for examining power than other classification approaches (e.g., Gaski 1986; Hart et al. 1997). Mediated power refers to the power sources whose reinforcements guiding the TF’s behaviors are external to the TF and the reinforcements are controlled by the DF (Brown et al. 1995). It includes coercion, reward and legitimate power sources. Coercion is defined as the TF’s perception that a DF can mediate punishments for it. Reward refers to the TF’s perception that a DF can mediate rewards for it if it complies. Legitimate implies that a DF is perceived to has a legitimate right to wield influence on the TF (Brown et al. 1983). Mediated power can be transferred to great extrinsic motivations for the TF. However, frequent use of it can damage firms’ long-term inter-organizational relationships, because such use only focus the TF’s shortterm compliances (Boyle et al. 1992; Brown et al. 1995; Frazier et al. 1986). Non-mediated power refers to the power sources whose enforcements guiding the TF’s behaviors are mediated by the TF itself and the success or failure of the TF’s behaviors is attributed to itself too (Brown et al. 1995). It includes the sources of expert, reference and information. Expert refers to the TF’s perception that a DF holds expertise or knowledge that is valued by it, while reference is based on the TF’s identification with a DF or its hope to be associated with the DF closely. Information refers to a DF’s ability to influence the TF by providing information that can facilitate the TF’s compliance (Brown et al. 1983). Compared with mediated power, the use of non-mediated power more focuses on the intrinsic motivation, namely common norms, values and inter-organizational relationship (Boyle et al. 1992; Brown et al. 1995). Thus, it produces fewer conflicts in the inter-organizational network. In addition to power, researchers have identified other two important social network factors: institutional pressures and trust. These two social network factors all can significantly impact firms’ IS related actions (e.g., Chwelos et al. 2001; Hart et al. 1997; Hart et al. 1998; Khalifa et al. 2006; Lai et al. 2006; Teo et al. 2003). Especially, they can affect firm’ interpretation and reaction to their partners’ power.