Customization and real time information access in integrated

eBusiness supply chain relationships

Richard Klein

Department of Management, College of Business and Behavior Sciences, Clemson University,

101 Sirrine Hall, Box 341305, Clemson, South Carolina 29634-1305, USA

Available online 7 March 2007

Abstract

eBusiness enabled information systems and technology have proliferated with the diffusion and technological advances of the

Internet. This research examines supply chain management relationships between service providers and clients, focusing on the

performance impacts of (1) the level of customization implemented by clients using vendor provided eBusiness solutions and (2) the

subsequent real time access achieved with respect to operational information maintained by vendors. The study also focuses on the

impacts of the provider’s information exchange behavior and both parties’ level of trust. Using dyadic data collected from a logistics

services provider and 91 clients, findings show that the level of customization and real time information access has a direct positive

impact on performance outcomes realized by both. Additionally, results demonstrate that provider’s level of trust in the client

positively influences their information exchange behavior, and in turn, information exchange behavior positively impacts client

customizations.

# 2007 Elsevier B.V. All rights reserved.

Keywords: Customization; Dyadic data; eBusiness; Integration; Logistics management; Outsourcing; Supply chain management

www.elsevier.com/locate/jom

Journal of Operations Management 25 (2007) 1366–1381

1. Introduction

Researchers note that supply chain management will

play an ever increasing role in the growing digital

economy (Gavirneni et al., 1999; Swaminathan and

Tayur, 2003). Beyond the pure sales and transaction

opportunities that emerged in the 1990s with the

Internet, businesses have innovatively employed tech-

nological advances to redefine relationships, share

processes, and collaborate (Wladawsky-Berger, 2000).

In meeting organizational supply chain needs, firms

enter into business relationships in an effort to facilitate

functions beyond their capabilities or outside core

competencies (Leonard-Barton, 1992). Effective supply

E-mail address: rklein@CLEMSON.edu.

0272-6963/$ – see front matter # 2007 Elsevier B.V. All rights reserved.

doi:10.1016/j.jom.2007.03.001

chain management requires the integration of activities,

functions, and systems (Vickery et al., 2003). Here,

integration between service providers and clients

constitutes a key strategic initiative (Reck, 1988;

Morris and Calantone, 1991; Ragatz et al., 1997).

Prior work finds supply chain integration strategies

impact diversification and firm performance (Narasim-

han and Kim, 2002), while electronic integration of

procurement functions benefits both suppliers and

customers (Mukhopadhyay and Kekre, 2002).

The current study focuses on the varying levels of

application customization implemented by clients in

facilitating recurring interactions employing outsource

supply chain service providers’ eBusiness solutions.

Customizations of such applications result in asset

specific investments (Williamson, 1989) on the part of

the client. Additionally, the extent to which clients

R. Klein / Journal of Operations Management 25 (2007) 1366–1381 1367

achieve real time, or direct, access to information

maintained by service providers constitutes a goal of

customization efforts (Brynjolfsson and Hitt, 2000),

efficiently and economically attainable through newly

developed Internet-based technologies. Accordingly,

this research seeks to understand the role of customiza-

tion and real time information access in implementing

service providers’ eBusiness solutions.

Recognizing the importance of fostering environ-

ments that support client investments in customizing

applications with business partners (Hill and Scudder,

2002), this research also examines the role of trust and

service providers’ information/knowledge exchanges

behavior in shaping client customization efforts.

Borrowing from transaction cost theory, Dyer and

Singh (1998) relational view of the firm suggests that

effective governance and knowledge exchange play

crucial roles in the evolution of any inter-organizational

relationship where partners engage in mutually bene-

ficial initiatives.

The balance of this manuscript proceeds in the

following order. The next section discusses eBusiness

solutions, followed by a review of the theoretical

foundations of the study and relevant background

literature specific to proposed research hypotheses. The

next section details the research design, including

measurement development, conduct of the empirical

survey, and review of sample data. Finally, the results of

the analysis are presented and discussed. The paper then

concludes with a review of the research, study

limitations, and future research directions.

2. eBusiness solutions

In integrating vendors’ logistics capabilities, client

firms require information specific to inventory levels

and physical flows to maximize their ability to serve

their own customers (Stein, 1998; Walker et al., 2000).

Such initiatives also afford clients the opportunity to

avail themselves of previously unused information held

by vendors, often used to develop value-added products

and services to strengthen their own client relationships

(Gulati and Kletter, 2005). Vendors likewise utilize

information specific to client requirements for global

optimization of plans and adaptive execution of

processes. Clients integrating logistics applications

enable vendors to plan capacities for peak periods

and exhibit requisite scalability of operations. As

shipments seasonally spike, anticipation of the exact

timing and extent of such activities constitute invaluable

operational necessities.

In filling these needs, dominant service providers,

such as large logistics vendors, often take advantage of

their centrality within the industry to influence assets,

information, and status (Gnyawali and Madhavan,

2001). Centrality provides the vendor with the power

to offer services in specified formats, realizing of

economies of scale, while clients may assume a

disproportionate amount of the effort to integrate

sourced services with their own assets. This situation

also allows these same vendor firms to achieve growth

through the replication of technology and solutions

subject to imitation (Kogut and Zander, 1992). Hence,

within the logistics industry, dominant vendors strive to

develop repeatable eBusiness solutions, employing

advances in Internet-based technologies.

Whereas vendors may take advantage of economies

of scale with respect to eBusiness solutions offered to

clients for customization, the current study seeks to

explore potential benefits derived from customization

within the context of individual client/vendor relation-

ships. In conjunction with customization, organiza-

tional ability to access timely, if not real time,

information has emerged as a strategic initiative

(Gavirneni et al., 1999; Cachon and Fisher, 2000; Chen

et al., 2000; Lee et al., 2000; Germain et al., 2001) in

resolving persistent supply chain challenges like the

bullwhip effect (Kahn, 1987; Lee et al., 1997; Kotabe

et al., 2003) and poor customer service (Shin et al.,

2000; Vickery et al., 2003). Rather than examine

previously studied vendor outcomes the current work

focuses on the seldom studied relationship as the unit of

analysis. Here, this research explores whether both

parties within the relationship, client and vendor, derive

benefits from client customizations and real time

information access through vendors’ eBusiness solu-

tions.

3. Prior research and hypotheses

3.1. Theoretical foundation

Coase (1937) advanced the notion of the ‘‘firm’’ as a

core economic entity, and Williamson (1975) used this

work as a catalyst for focusing economic theory on the

‘‘transaction’’ or basic unit of exchange. Borrowing

from the perspective that the course of employment

yields ‘‘idiosyncratic’’ human capital (Marshall, 1961),

theory advanced that in meeting transactional needs,

firms invest in assets specific to exchange fulfillment

(Williamson, 1989). Asset specificity dictates that a

tangible, or intangible, asset holds value within a

specific domain or environment and loses some or all of

R. Klein / Journal of Operations Management 25 (2007) 1366–13811368

that value in a different domain or environment (Whyte,

1994). Moreover, under transaction cost theory, asset

specificity takes the form of (1) site specificity, (2)

physical asset specificity, and (3) human asset

specificity, all of which potentially give rise to

incentives in addition to governance structures (Wil-

liamson, 1985). Grover and Malhotra (2003) outline the

rich application of transaction cost theory across the

various business disciplines and demonstrate the utility

in applying this theoretic stream in operations and

supply chain management research.

Prior research finds relationship-specific asset

investments, namely, time, money, and effort, support

richer forms of collaboration and process management

among partners (Joskow, 1988). Moreover, specializa-

tions of assets constitute a requisite condition for direct,

or indirect, rent generation (Amit and Schoemaker,

1993). Within the context of inter-organizational supply

chain relationships information technology, or IT,

customizations constitute a physical asset specific

investment with the potential to generate rents through

recurring inter-firm interactions (Dyer and Singh,

1998). The current study views customization of

integrated eBusiness applications as an asset specific

investment made by clients in the course of a strategic

business relationships with respective outsource service

providers. Additionally, researchers note that real time,

or direct, access to externally maintained information

yields improved efficiency (Brynjolfsson and Hitt,

2000). Hence, the level of client customization along

with subsequent real time information access enabled

by technology investments see the generation of

potential performance benefits for both partners.

Dyer and Singh (1998) relational view of the firm

suggests that pairs of firms can realize advantages from

Fig. 1. Customization in outsourced su

their inter-firm connections and preserve relationally

derived performance benefits through dyadic level

barriers to imitation (Dyer and Singh, 1998). The

distinctive characteristic of such ‘‘relational’’ partner-

ships in addition to relationship specific asset invest-

ments include inter-firm information exchanges and

effective governance. Consistent with the recognition of

the role of effective governance within firm-to-firm

relationships, this research examines provider and

clients’ perceptions of the level trust that exists as

indicative of relational governance (Nooteboom et al.,

1997; Das and Teng, 1998). Moreover, providers’

information/knowledge exchange behavior within the

relationship constitutes a requisite input to clients’

customization efforts with respect to vendors’ eBusi-

ness solutions.

The final model depicted in Fig. 1 reflects the

theoretical underpinnings of asset specificity in con-

sidering the client customization and real time informa-

tion access constructs as well as the subsequent

performance outcomes realized by relational partners.

The inclusion of client and provider trust in the other

party as well as information/knowledge exchange from

provider to client emerges from an examination of Dyer

and Singh (1998) relational view of the firm. Given the

focus on the inter-firm relationship between the supply

chain service provider and client, in conjunction with the

relational view’s roots in asset specificity, this base

provides an appropriate foundation for these model

constructs. The exploratory phase of this work, discussed

in the ‘‘Research Design’’ section of this report, provided

an opportunity to consider these and other potential

constructs as well as refine the final model configuration.

Within the current research, customization focuses

on the efforts expended by client firms in integrating

pply chain function integration.

R. Klein / Journal of Operations Management 25 (2007) 1366–1381 1369

vendors’ eBusiness solutions. Specifically, a large

national law firm examined in the exploratory phase

of the study reported investing in developing complex

programs to convert information from vendors’

proprietary data formats, as well as to translate

extensible markup language, or XML, documents.

Information access, specifically real time access,

represents a core initiative for client firms within the

study. This firm noted converting information provided

by one vendor twice daily. Despite the inter-firm data

flows, the client noted significant Internet traffic to the

vendor’s online tracking site where ‘‘up to the minute’’

information could be obtained. Ultimately, the law firm

expended additional time and effort in developing

routines capable of capturing real time information. In

developing relationships, clients also noted the need for

transferring knowledge specific to the vendors’ pro-

prietary systems as well as strategic information.

Finally, trust, consistent with Mayer et al. (1995)

integrated model, represents each partners perceptions

of the other’s ability, benevolence, and integrity. The

client firm in the exploratory study noted reservations

about a vendor’s ability to meet deadlines and doubts

about other commitments made. On the vendor side,

providers reported carefully evaluating each client’s

technical capabilities and integrity in offering solutions

to clients.

3.2. Customization and real time information

access

Research shows customization to have mixed effects

with lower levels of customization in manufacturing

machine processes allowing for significant efficiency

advantages (Kelley, 1994). By contrast, customized, as

opposed to standardized, products yield fewer organiza-

tional layers and narrower spans of control (Vickery et al.,

1999), while customization through electronic data

interchange, or EDI, positively impacts delivery perfor-

mance (Ahmad and Schroeder, 2001). The current study

focuses on the level of client customization of integrated

supply chain functions through outsource service

providers’ eBusiness applications and solutions. Here,

customization represents a form of asset specific

investment (Williamson, 1989; Whyte, 1994) required

to integrate inter-organizational processes and external

information necessitated by recurring interaction rou-

tines (Dyer and Singh, 1998).

Prior research examines and debates the belief that

IT positively impacts firm performance (Clemons and

Row, 1993; Brynjolfsson et al., 1994; Brynjolfsson and

Hitt, 2000). Information technologies possess the ability

to radically reduce the cost and time expended in

processing and communicating information, which has

led to changes in the way organizations accomplish

tasks (Malone, 1987; Hitt and Brynjolfsson, 1996).

However, difficulties emerge in capturing less tangible

productivity gains, such as improved asset management

and resource control (Hitt and Brynjolfsson, 1996).

Research argues that firm level studies provide a means

of capturing difficult to measure and often ignored

intangibles (Brynjolfsson et al., 1994). Additionally,

studies contended that understanding the relationship

between IT and performance necessitates an examina-

tion at the firm level where inputs and outputs to

productivity can be measured (Brynjolfsson et al., 1994;

Brynjolfsson and Hitt, 2000). Accordingly, this research

examines specific firm level tangible and intangible

performance benefits attributable to the organization’s

relationship with the respective business partner.

Theory suggests that relationship-specific asset

investments have the ability to generate rents by

enabling richer forms of inter-firm interactions (Dyer

and Singh, 1998). Not all clients will seek, or need, to

customize vendor solutions in order to realize perfor-

mance benefits. This study contends that such asset

specific investments hold the potential to positively

influence specific tangible and intangible performance

outcomes derived from such ‘‘richer’’ forms of

interaction. The measurement development section of

this paper details the operationalization of both

constructs in greater detail. Hence, this research posits

that client customization of service provider integrated

eBusiness supply chain applications positively influ-

ences performance results realized by both service

providers and clients, as stated in the following

hypotheses.

Hypothesis 1. Client customization of integrated eBu-

siness supply chain vendor solutions will have a positive

direct effect on performance results realized by service

providers with respect to the outsource relationship.

Hypothesis 2. Client customization of integrated eBu-

siness supply chain vendor solutions will have a positive

direct effect on performance results realized by clients

with respect to the outsource relationship.

In the traditional value chain, clients’ have also

sought, even demanded, greater ‘‘visibility’’ over the

various aspects of their value chain (Walker et al., 2000;

Lee and Whang, 2001), particularly with respect to

functions and processes outsourced to business partners

(Webb and Gile, 2001). Additionally, research posits

that technology investments should result in direct

R. Klein / Journal of Operations Management 25 (2007) 1366–13811370

access to external information (Brynjolfsson and Hitt,

2000). As such, the following hypothesis posits that

customization will have a significant positive impact

upon the presence of real time direct access.

Hypothesis 3. Client customization of integrated eBu-

siness supply chain vendor solutions will have a positive

direct effect on real time access to information main-

tained by outsource service providers.

Consistent with the belief that real time access

positively influences customization, this research sees

such direct access positively impacting both provider and

client performance benefits. As previously noted,

accessing information timely, if not real time, constitutes

a key initiative in supply chain management aimed at

alleviating issues that have plagued effective and efficient

operations (Gavirneni et al., 1999; Cachon and Fisher,

2000; Chen et al., 2000; Lee et al., 2000; Germain et al.,

2001), specifically the bullwhip effect (Kahn, 1987; Lee

et al., 1997; Kotabe et al., 2003) and poor customer

service (Shin et al., 2000; Vickery et al., 2003). Given the

notion that such information access can aid in better

managing supply chains, addressing problems like

information distortions and poor service levels should

see the accrual of mutual performance benefits. Hence,

the study posits the following two hypotheses.

Hypothesis 4. Real time access to information main-

tained by outsourced service providers will have a

positive direct effect on performance results realized

by service providers with respect to the outsource

relationship.

Hypothesis 5. Real time access to information main-

tained by outsourced service providers will have a

positive direct effect on performance results realized

by clients with respect to the outsource relationship.

3.3. Information/knowledge exchange

Information/knowledge exchange accepted as a key

component of cooperative behavior (Heide and Miner,

1992) constitutes a source of potential competitive

advantage (Argote and Ingram, 2000). Prior theoretical

work presents a conceptual model of information

exchanges between suppliers and retailers, noting the

growing role of cooperation (Gavirneni et al., 1999).

Work posits that complex technologies and product

development play a role in information/knowledge

transfer and subsequent integration (Carlile and

Rebentisch, 2003), while knowledge diversity facil-

itates the creation and transfer of knowledge (Lapre and

Wassenhove, 2001). Similarly, work examines sources

of operational performance improvement in supplier

partnerships, finding higher and more technical

information/knowledge exchanges in more tenured

relationships (Kotabe et al., 2003).

Prior academic work also points to the existence of

both public and private information, where public

information can be verified through third parties and is

available in the public domain (Uzzi and Lancaster,

2003). By contrast, information not available in the

public domain and/or verifiable through third parties

constitutes private information. Additionally, researchers

define the following classes of information specifically

shared in supply chains: (1) order, (2) operational, (3)

strategic, and (4) strategic/competitive (Seidmann and

Sundararajan, 1997). These classes represent the

potential impacts of sharing behaviors on operations,

sales, marketing, technology development, and produc-

tion strategies (Seidmann and Sundararajan, 1997).

Higher classes of information, specifically classes 2

through 4, constitute non-transactional information.

The current study recognizes that customization

inherently requires greater technical capabilities and

knowledge (Thompson and King, 1997). Moreover,

successful inter-organizational development depends

on acquiring and exploiting these capabilities, as

collaborating organizations face differing knowledge

stocks (Carlile and Rebentisch, 2003). Hence, devel-

opment efforts aimed at integrating inter-organizational

systems necessitates reliance upon the expertise and

knowledge stocks of the partner firm for success. The

current study hypothesizes that service providers’

exchanges of non-transactional, private information

with clients positively impacts clients’ implementation

of higher levels of customization, as stated in the

following hypothesis.

Hypothesis 6. Information/knowledge exchanges on

the part of the service provider with clients will have

a positive direct effect on client customization of inte-

grated eBusiness supply chain vendor solutions.

3.4. Trust

Trust has been established as core component of

persistent business partnerships and strategic alliances

(Ganesan, 1994; Gulati, 1995; Zaheer and Venkatraman,

1995; Johnson et al., 1996; Nooteboom et al., 1997; Hart

and Saunders, 1998; Zaheer et al., 1998; Joshi and Stump,

1999). Trust influences cooperation and teamwork within

organizations (Jones and George, 1998), characterized as

mutually beneficial initiatives (Dyer and Singh, 1998).

Moreover, in any alliance arrangement, firms need to

R. Klein / Journal of Operations Management 25 (2007) 1366–1381 1371

have an adequate level of confidence in their partner’s

cooperative behavior (Das and Teng, 1998). In con-

sidering specific exchanges between parties, one or both

might develop a view of the trust that exists within the

context of their recurring interactions.

McKnight et al. (1998) identify three characteristics

of trust that have appeared in existing literature,

specifically ability, benevolence, and integrity. Consis-

tent with Mayer et al.’s (1995) integrated model of

organizational trust, ability includes a set of skills,

competencies, and/or characteristics that enable either

party to exert influence within some specific domain of

expertise. Benevolence constitutes the extent to which

either party believes that the other acts in a positive

manner with regard to their interactions, excluding

egocentric profit considerations. Finally, integrity con-

siders either party’s perception of the others’devotion to a

set of generally accepted principles. Hence, client’s

perceived trust in the service provider; specifically the

provider’s ability, benevolence, and integrity; will

positively influence subsequent investments in customi-

zation as detailed in the following hypothesis.

Hypothesis 7. Client’s perceptions of trust in service

providers will have a positive direct effect on client

customization of integrated eBusiness supply chain

vendor solutions.

Additionally, this study expects that the service

provider’s perceived trust in the client will positively

shape information/knowledge exchanges on the part of

the vendor. Arguably, service providers’ sharing of

strategic information/knowledge with clients will

necessitate favorable perceptions of the client’s ability,

benevolence, and integrity. Research identifies such

characteristics as primary components of organizational

trust (McKnight et al., 1998) and indicative of the

cooperation that exists within inter-firm relationships

(Heide and Miner, 1992). Therefore, the following

hypothesis considers vendors’ perceived trust in the

client with respect to information/knowledge transfers

from the former to the latter.

Hypothesis 8. Service provider’s perceptions of trust in

clients will have a positive direct effect on information/

knowledge exchanges on the part of service providers

with clients.

3.5. Controls

Past research finds larger organizations less appre-

hensive about partner exploitation than small (Doz,

1987), with larger firms possessing a potential

advantage in exploiting available resources and power

with respect to supply chain partners (Hitt et al., 2002).

Additionally, different industry setting possess the

ability to shape buyer and supplier relationships

(Bensaou and Anderson, 1999). Finally, work suggests

that longevity of a relationship is correlated with higher

levels of trust (Anderson and Weitz, 1989) and creates

‘‘experience-based assets,’’ which generate efficient

communications and information exchanges (William-

son, 1985). Accordingly, client firm (1) size and (2)

industry as well as (3) relationship longevity are

included as control variables within the study.

4. Research design

This study comprised an exploratory and subsequent

confirmatory phase. The exploratory phase employed a

case study technique (Yin, 1994), with both clients and

vendors providing the requisite qualitative data to

develop a valid survey instrument used in subsequent

research (Stone, 1978). The second, confirmatory field

study examined an outsource service provider and

clients utilizing the vendor’s eBusiness solutions

(Creswell, 1994).

4.1. Inter-firm dyads as unit of analysis

Prior research emphasizes the importance of dyadic

research designs in investigating inter-firm relationships

(Clemons and Row, 1993; Anderson et al., 1994; Dyer,

1996; Chen and Paulraj, 2004). However, practical

difficulties often associated with such research designs

have lead to collection of data at the relationship level

from only one side (Grover et al., 2003; Subramani and

Venkatraman, 2003; Malhotra et al., 2005). Hence, the

current study focuses on the collection of field data from

different account managers and their counterparts at

respective client firms using the vendor’s products and

services.

The selected vendor site, a global logistics provider

headquartered in the southeastern United States

provides package delivery services to clients represent-

ing a broad spectrum of industries. Traditionally, global

package delivery vendors focus on ensuring accurate

and timely delivery; however, in recent years’ offerings

include an ever growing number of strategic eBusiness

products and services beyond traditional package

delivery. The selected vendor’s investments have

focused on developing numerous electronic supply

chain solutions in addition to developing an infra-

structure of skilled technical account managers to

service client firms. Vendor account managers and their

R. Klein / Journal of Operations Management 25 (2007) 1366–13811372

respective client firm contacts manage the inter-firm

relationships, providing for a setting well suited to the

study variables.

4.2. Measurement development

The exploratory phase’s qualitative data includes

historical and archival data, such as annual reports,

published case studies, marketing material, press

releases, and commercial news reports. Best-in-class

vendors operating in the logistics industry; specifically

Airborne Express, DHL Worldwide Express, Federal

Express, and United Parcel Service; provided an

opportunity to assess trends relative to issues under

investigation.

Given the richness of this comparative industry and

vendor data, an open-ended interview technique (Yin,

1994) facilitated the collection of background data

directly from the focal vendor firm. These contacts

included product and service marketing executives, e-

Commerce product account managers, IT designers and

developers, and executives responsible for client

account management. Additional data included obser-

vations captured during marketing strategy as well as

sales and marketing training sessions. This same open

ended interview technique facilitated the collection

background data from client firms, referred by the

vendor and contacted independently, as well as

competitors of the vendor.

The qualitative data served as the basis for develop-

ment of individual measures of customization, perfor-

mance, and information/knowledge exchange. Archival

data assessed real time access, and the study employed

established trust measures (McKnight et al., 2002a,b).

All measures relied upon two pilot studies to establish

construct validity (Nunnally and Bernstein, 1994). The

initial pilot developed measures employing academics in

information systems and supply chain management as

well as subject matter experts within the vendor firm. The

subsequent pilot refined measures utilizing a ‘‘policy

capturing’’, or ‘‘scenario creation’’, methodology

(Webster and Trevino, 1995) surveying individuals

outside of the study and vendor site with logistics

management, IT, and/or purchasing experience.

4.2.1. Customization measures

This research developed a two item omnibus and

single item subjective measure of customization based

upon information obtained through the qualitative

analysis. In implementing inter-organizational integra-

tion, the client’s level of customization generally fall

into three categories; generic, configured/standardized,

or customized. These categorizations mirror the vendor

site’s operationalization of their product offerings.

A generic level of customization sees mutual

acceptance of established, default information

exchanges of a less complex and often non-private

nature, for instance, using Federal Express’ basic online

tracking application to determine package delivery

status (Morton, 2002). Configured/standardized custo-

mizations exhibit information exchanges within para-

meterized conditions, such as the employment of XML

standards in data exchanges that certain Federal Express

clients, like Overstock.com, employ (Russell, 2002).

Finally, customized configurations entail highly spe-

cialized built to order information exchange solutions,

similar to custom EDI routines, such as Sun Micro-

systems Inc.’s Asian subsidiary’s highly customized

DHL supply chain systems, which yield cost savings

and improved response times (McIlvaine, 2002).

As noted, the study includes a subjective measure of

customization, recognizing potential differing percep-

tions of viewing the construct along a spectrum from

generic to configured/standardized to customized. This

measure asks client firms to identify the percentage of

customized applications employed in facilitating inter-

actions and managing their relationship with the vendor

firm. The alternative measure affords validation of

objective measures. Table 2, in Section 5 details the

items used for each construct, as well as the descriptive

statistics for the data collected during the field study.

4.2.2. Real time information access measures

Measuring clients’ real time, or direct, access to

information maintained by the vendor proved to be best

assessed by the IT group within the service provider’s

organization. Surveying individual clients during the

initial pilot revealed ambiguity in individual client

respondents’ understanding of their own firm’s specific

technological capabilities. However, the vendor’s IT

arm carefully monitored all clients’ access to the

vendor’s computing resources. Hence, a binary indi-

cator captures real time access to information main-

tained by the service provider (Neter et al., 1996). The

vendor’s internal IT group generated indicators of each

client’s ability to directly access inter-organizational

system data. Single item measures, although not

recommended, are justifiable under certain conditions

(Straub et al., 2004), for example archival data sources

as is the case within this study.

4.2.3. Performance measures

Additional construct development includes a three

item scale of omnibus measures and eight item

R. Klein / Journal of Operations Management 25 (2007) 1366–1381 1373

subjective measures for performance. A survey of

prior empirical research examining the performance

impacts and benefits of IT (Grover, 1993; Barua

et al., 1995; Iacovou et al., 1995; Premkumar and

Ramamurthy, 1995; Ramamurthy et al., 1999; Chwelos

et al., 2001; Plouffe et al., 2001) reveals a set of

subjective measures of specific performance outcomes.

Recognizing that clients may employ limited, or

generic, customizations and realize subsequent per-

formance improvements, the pilot studies focused on

identifying a broad set of specific tangible and

intangible outcomes associated with greater organiza-

tional performance. These include eight outcomes,

namely, improved asset management, improved capa-

city planning, improved resource control, increased

flexibility, increased productivity, lower operating

costs, and reduced workflow.

4.2.4. Information/knowledge exchange measures

This research also formulated a three item scale of

omnibus measures of information/knowledge exchange

that focuses on private and non-order specific informa-

tion. In considering public and private information,

private information not available in the public domain

and/or verifiable through third parties (Uzzi and Lan-

caster, 2003) drove development of measures. Moreover,

the development effort focused on capturing the non-

order, or transaction, specific information, noted in prior

academic work (Seidmann and Sundararajan, 1997).

Specifically, researchers point to (1) order, (2) opera-

tional, (3) strategic, and (4) strategic/competitive

information shared within supply chain environments.

Early case study work revealed that clients found value,

specific to their implementation efforts, in information

categorized as operational, strategic, and strategic/

competitive in nature. Hence, measures sought to capture

the service provider’s sharing of this non-transactional

information.

4.2.5. Trust measures

Finally, this study adopts an 11 item scale of omnibus

measures of trust previously developed and validated

for electronic markets (McKnight et al., 2002a,b).

These measures reflect three characteristics of trust;

ability, benevolence, and integrity; appearing in existing

literature and consistent with an established integrated

model of organizational trust (Mayer et al., 1995).

Although previously employed in organizational level

information systems research (McKnight et al.,

2002a,b), pilots fully tested all trust measures with

other constructs as previously suggested (Straub and

Carlson, 1989).

4.3. Data collection

The final survey was administered via an Internet

survey site. Consistent with a previously employed

approach for gathering dyadic data (Dyer, 1996), key

informants within both organizations were surveyed

(John and Reve, 1982). The account managers and their

client counterparts were identified as the most knowl-

edgeable informants in an approach generally recom-

mended (Huber and Power, 1980; Venkatraman and

Grant, 1986) for minimizing key-informant bias

(Bagozzi and Phillips, 1982). A senior executive within

the marketing organization of the vendor site contacted

a total of 183 of account managers via email on behalf

of the researcher. URLs to the client and vendor

versions of the Internet surveys and respective pass-

words accompanied the survey instructions. In total,

132 of the 183 separate account managers responded to

the survey for a response rate of 72 percent for the

vendor side of the survey, and 91 of the 183 different

client organizations’ contacts responded for a response

rate of 49 percent for the client side of the survey.

Ultimately, 182 completed client and vendor instru-

ments formed 91 usable dyads. Research employing

matched dyad strategies average approximately 58

percent (Dyer, 1996; Johnson et al., 1996; Fein and

Anderson, 1997).

4.3.1. Sample demographics and descriptive

statistics

The results reflect a diverse representation of both

client and vendor respondents with respect to gender, as

well as overall work, IT, and business relationship

management experience. Moreover, client firm respon-

dents represent appropriate organizational levels within

the predicted functional areas, with the majority at the

director/manager level and above and 45.7 percent

representing operations and logistics functions. Table 1

summarizes the descriptive statistics for participating

client firms with respect to industry, organization size,

and relationship longevity.

4.3.2. Analysis of non-response bias

The vendor firm’s corporate confidentiality policies

precluded the possibility of directly contacting client

firms, prohibiting direct assessment of any potential

non-response bias. Methodological literature suggests a

60 percent response rate as a reasonable assurance of the

absence of systematic bias from respondents (Bailey,

1978). The current study’s 61 percent achieved rate

exceeds this threshold, with 132 account managers and

91 clients responding for a total of 223 out of a potential

R. Klein / Journal of Operations Management 25 (2007) 1366–13811374

Table 1

Firm demographics

Characteristic Category Percentage

Client industry Manufacturing 14.1

Banking/Finance/Accounting 9

Insurance 5.1

Real Estate/Legal Services 12

Wholesale or Retail 26.1

Government 3.8

Education 1.5

Healthcare 7.5

Communications 3.4

Publishing/Broadcasting/. . . 8.1

Computer/Data Processing 10.3

Client organization

size, based on #

of employees

1–499 25.6

500–999 25.6

1000–4999 16.7

5000–9999 6.4

10,000–19,999 10.3

20,000–29,999 5.1

30,000–39,999 3.8

40,000–49,999 2.6

50,000 and up 6.8

Relationship longevity 1–5 years 74.7

6–10 years 15.4

11–15 years 3.3

16–20 years 6.6

21 years plus 0

366 pooled responses. In addition, comparing construct

means between the early wave of respondents and the

fourth and final week respondents provides an alternate

means for assessing any bias (Armstrong and Overton,

1977). Exactly 43 of the 182, or 22.9 percent, of the

total respondents forming the 91 dyads completed the

survey during the latter period. Analysis of variance,

or ANOVAs, for waves examined industry, location,

number of employees, tenure, and the individual

respondent’s gender as well as years of overall work,

IT, and business relationship management experience.

The analysis detected no significant differences.

5. Analysis and results

The quantitative analysis focused on measurement

validation and hypothesis testing. The validation phase

assessed the reliability and validity of constructs, while

the hypothesis-testing phase analyzed outlined hypoth-

eses. Given multiple interdependent relationships, the

analysis employed structural equation modeling, or

SEM, techniques, specifically partial least squares, or

PLS, testing relationships between the latent variables

and examining both measurement and structural models

(Barclay et al., 1995; Chin, 1998). Table 2 details

specific construct measures for dependent and inde-

pendent variables as well as standardized data values for

ranges, means, and standard deviations for both the

service provider and clients.

5.1. Reliability assessment

Cronbach’s as in excess of .7 provides a commonly

accepted standard for evaluating the reliability of the

scales (Nunnally and Bernstein, 1994). Moreover, this

.7 standard also assesses the adequacy of Composite

Reliability scores (Fornell and Larcker, 1981). The

Cronbach’s a for the reflective measures; customiza-

tion, information/knowledge exchange, as well as

provider and client trust; .873, .753, .912 and .784,

respectively, all exceed the prescribed .7 threshold as

reported in Table 3.

5.2. Validity assessment

The measurement model provides for primary

assessment of instrument validity within PLS, as it

specifies the relationship between the observed vari-

ables, or indicator variables, and latent variables, or

actual constructs being measured (Igbaria et al., 1995).

Assessing convergent and discriminant validity of

measures necessitated implementation of different

validation techniques due to the presence of both

formative and reflective measures (Blalock, 1969).

Formative measures include service provider and client

performance, and real time information access; while

reflective include client customization, information/

knowledge exchange, and service provider and client

trust.

Average variance extracted, or AVE, measures the

percentage of overall variance in indicators captured by

latent constructs through the ratio of the sum of

captured variance and measurement error (Hair et al.,

1998). Magnitudes of the square root of AVEs should

exceed .8, converging toward 1 (Fornell and Larcker,

1981). The square root of the AVE of measures and

correlations among measures provide a means for

testing discriminant validity. When the square root of

the AVE of a measure exceeds the correlations between

the measure and all other measures, adequate dis-

criminant validity exists (Gefen et al., 2000). Inter-

correlations and square roots of AVEs reflect no

discriminant validity issues as detailed in Table 3.

A variation of Campbell and Fiske (1959) multitrait-

multimethod, or MTMM, analysis provides an alternate

measure of discriminant, and subsequent convergent,

validity for formative measures (Kenny and Kashy,

R. Klein / Journal of Operations Management 25 (2007) 1366–1381 1375

Table 2

Summary of constructs

Item Service provider Customer

Obs.

range

Mean S.D. Obs.

range

Mean S.D.

Client customization

Our organization uses uniquely built or customized, rather than canned or generic,

applications to facilitate information exchanges with our partner

1–7 4.48 1.73

The applications that are used to facilitate information exchanges with our partner

can be described on a scale from generic to customized

1–7 4.46 1.66

What percentage of applications used in managing your relationship with this business

partner are customized, i.e., developed to expressly manage the flows of information

between our organization and this business partner?

1–10 4.38 2.59

Performance

Our organization has realized substantial improvements in tangible performance

outcomes, i.e., things that are easily measurable or discernable

1–7 4.07 1.79 1–7 5.09 1.5

Our organization’s overall economic situation has improved as a result of its

relationship with our partner

1–7 4.11 1.68 2–7 4.95 1.33

Our organization has realized substantial improvements in intangible performance

outcomes, i.e., things that are not easily measurable or discernable

2–7 4.15 1.56 2–7 4.93 1.32

Our organization has realized the following performance outcomes as a result of our

interactions with this business partner

Improved asset management 1–7 3.97 1.56 1–7 4.77 1.54

Improved production planning 1–7 4.19 1.66 1–7 5.05 1.51

Improved resource control 1–7 3.98 1.61 1–7 4.84 1.61

Increased flexibility 1–7 4.1 1.7 2–7 5.13 1.57

Increased productivity 2–7 4.07 1.61 1–7 4.98 1.55

Lower operating costs 1–7 4.07 1.66 1–7 5.09 1.55

More timely information 1–7 4.01 1.6 1–7 4.86 1.43

Reduced workflow 1–7 3.93 1.8 1–7 5.11 1.55

Service provider information/knowledge exchange

Our organization shares a substantial amount of strategic information with this

business partner

1–7 3.33 1.92

Our organization shares only the minimum transactional information, e.g.,

contact information, with this business partner, necessary to complete the transaction

1–7 3.49 1.84

Our organization is extremely restrained with regard to sharing strategic firm

information with this business partner

1–7 3.27 1.87

Trust

Our business partner is competent and effective in their interactions with our organization 2–7 4.51 1.71 2–7 4.74 1.55

Our business partner performs all of their roles very well 2–7 4.53 1.58 2–7 4.97 1.52

Overall, this business partner is a capable and proficient 2–7 4.56 1.5 2–7 4.98 1.53

In general, this business partner is knowledgeable about their industry and

business operations

2–7 4.62 1.86 2–7 4.98 1.58

Our organization believes that this business partner would act in our best interest 2–7 4.58 1.63 2–7 5.47 1.45

If our organization required help, this business partner would do their best to

provide assistance

2–7 4.66 1.63 2–7 5.42 1.57

This business partner is interested in our organization’s well being and not just their own 2–7 4.82 1.56 2–7 5.3 1.52

This business partner is truthful in their dealings with our organization 2–7 4.88 1.52 2–7 5.34 1.37

Our organization would characterize this business partner as being honest 2–7 4.9 1.58 3–7 5.49 1.26

This business partner keeps their commitments 1–7 4.74 1.6 2–7 5.24 1.39

This business partner is sincere and genuine 2–7 4.91 1.61 2–7 5.18 1.36

1992). In an existing analytical approach, formative

items should correlate with a ‘‘global item that

summarizes the essence of the construct (p. 272)’’

(Diamantopoulos and Winklhofer, 2001). An alternate

second version of this technique takes the product of

normalized item scores and their PLS weights to derive

weighted item scores (Ravichandran and Rai, 2000).

Finally, a third previously employed version of this

R. Klein / Journal of Operations Management 25 (2007) 1366–13811376

Table 3

Composite reliability, intercorrelations and AVEs

# of items Composite

reliability

Cronbach

a0sMatrix of intercorrelations and square root of AVEs (*)

1 2 3 4 5 6 7

1. Provider trust 11 .944 .912 .921*

2. Information/knowledge exchange 3 .867 .753 .025 .861*

3. Client trust 11 .876 .784 .308 .331 .838*

4. Customization 3 .92 .873 .301 .237 .241 .89*

5. Real time access 1 na na .109 .15 �.065 .105 1*

6. Client performance 11 .778 .953 .16 .232 .006 .206 .064 .935*

7. Provider performance 11 .79 .964 .253 .294 .385 .176 .16 �.029 .936*

technique (Bagozzi and Fornell, 1982) sums weighted

scores for items that measure the same construct to

derived composite scores for constructs. Using all three

approaches with item-to-construct correlation matrices,

inter-items correlate more highly with each other than

with measures of other constructs and with respective

composite constructs, indicating no significant discri-

minant validity issues.

Finally, in assessing convergent validity, measures

believed to be part of the same construct will correlate at

a significant level with one another (Campbell and

Fiske, 1959). Each construct should only include items

explaining 50 percent or more of the variance for

respective constructs (Fornell and Larcker, 1981),

specifically loadings in excess of .7, thus providing

evidence of convergent validity. In addition, all

measures thought to be part of same construct should

correlate highly at a significant level with one another.

Within the current analysis all items to composite

construct scores for all dependent and independent

variables correlate significantly at a .01 level, indicating

no convergent validity issues.

Table 4

PLS analysis results

Information/knowledge

exchange

Customization Re

ac

Provider trust .365** (Hypothesis 8)

Information/knowledge

exchange

.462*** (Hypothesis 6)

Client trust .202 (Hypothesis 7)

Customization .4

Real time access

R2 .23 .31 .3

Client industry .06

Client org. size .19

Relationship longevity .04

* Significant at .05 level.** Significant at .01 level.

*** Significant at .001 level.

5.3. Hypothesis testing

SEM techniques evaluate the explanatory power of

the proposed model and significant paths, or hypothe-

sized relationships, among unobservable variables, or

latent constructs (Igbaria et al., 1995). Hypothesis

testing for the model within PLS occurs through an

examination of the structural model, where a series of

ordinary least squares regressions estimates the

dependent relationships or paths among hypothesized

theoretical relationships. Each path coefficient repre-

sents the direct effect of predictor variables on

dependent variables, while the product of predictor

variables and intervening variable captures indirect

effects. The total effect of predictor variables on

endogenous variables equals the sum of the direct and

indirect effects. The proportion of the variance

accounted for by all antecedents’ represents the total

R2 associated with each endogenous construct (Igbaria

et al., 1995). T-statistics calculated via a PLS ‘‘boot-

strapping’’ resampling technique serves as a basis for

evaluating the significance of path coefficients.

al time

cess

Provider

performance

Client performance

63*** (Hypothesis 3) .380*** (Hypothesis 1) .327** (Hypothesis 2)

.27* (Hypothesis 4) .344*** (Hypothesis 5)

6 .33 .35

.01 .04

�.06 .05

�.02 .04

R. Klein / Journal of Operations Management 25 (2007) 1366–1381 1377

Table 4 reports the results for all hypotheses

including path coefficients and total R2 for the research

model. Client customization positively impacts both

service provider and client performance results accrued

within the relationship, supporting Hypothesis 1 and

Hypothesis 2. Additionally, as expected results show

that client customization positively influences the

client’s real time access to information maintained by

the vendor, supporting Hypothesis 3. Real time

information access also shapes both service provider

and client performance results accrued within the

relationship, supporting Hypothesis 4 and Hypothesis 5.

The analysis detected no significant direct effects

between client trust and customization, Hypothesis 7;

however, results show the vendor’s information/knowl-

edge exchange behavior has a positive direct effect on

client customization, Hypothesis 6. Finally, service

provider’s perceived trust in the client has a positive

impact on the subsequent information/knowledge

exchange behavior, Hypothesis 8. The analysis detected

no significant results for control variables.

6. Discussion

This research sought to explore the ability of clients’

customization of service providers’ eBusiness solutions

and real time information access to vendor maintained

data to positively influence performance benefits of both

parties within the relationship. Additionally, this study

examined the role of effective governance and informa-

tion exchanges within the context of customization

efforts. The results suggest a number of important

implications for both academic research and practice.

Academics note that interdependent relationships

and strategic collaboration constitute core components

of supply chain management (Chen and Paulraj, 2004).

Collecting data from both sides of the relationship, the

current research adds to the limited number of other

dyadic studies (Clemons and Row, 1993; Kirsch et al.,

2002). This approach allows for enhancing our under-

standing of these inter-organization relationships.

Moreover, the examination of noted elements of the

relational view’s strategic partnerships (Dyer and Singh,

1998); namely clients’ customization, service provi-

ders’ information/knowledge exchange, and both

parties’ trust; represents one of the few empirically

based opportunities to gain insight into collaborative

environments from both sides of the dyad.

Additionally, this research investigates IT integration,

considered an important component of supply chain

relationships (Frohlich, 2002; Vickery et al., 2003),

specifically focusing on logistics integration, a noted

construct within supply chain management (Stock et al.,

1998, 2000). This work represents a unique empirical

study focusing on IT integration components, customi-

zation and real time information access, of the logistics

function through Internet-based environments. More-

over, this research provides insights into the ITaspects of

the ever growing business-to-business digital economy.

The study’s finding also support the argument that

specializations of IT assets play an important role in the

creation of economic rents (Amit and Schoemaker,

1993). More importantly, this research examines both

buyer/client and supplier/vendor performance with

respect to their inter-organization interactions. Existing

supply chain research examines operational indicators

as well as financial performance factors (Vickery et al.,

1995; Beamon, 1999; Jayaram et al., 1999; Kathuria,

2000) specific to buyer performance; while quality and

cost measures (Ahire et al., 1996; Jayaram et al., 1999;

Tan et al., 1999; Kathuria, 2000; Shin et al., 2000)

dominate work examining supplier performance. Many

existing measures while relevant to firm or industry

specific research contexts do not adequately isolate

relationally based outcomes. Measures developed and

validated here focus on capturing performance derived

for each partner within the inter-firm relationship.

From a practical perspective, technology specific

investments with supply chain partners may enhance

clients’ overall value chain. Clearly not all logistics

clients require extensive integration or even direct

access to vendor maintained data; however, in looking

at a broad set of performance benefits and outcomes

accrued through inter-organizational supply chain

relationships, results suggest that those firms achieving

greater customization realize increased benefits. The

law firm in the exploratory phase noted how their real

estate division invested in customizing and gaining

direct access to information, continuously updating

staff on physical contract flows through the firm’s

BlackBerry server. The client explained that these

efforts had served to significantly reduce the frequency

of and costs associated with closing delays. The

potential to derive greater benefits from investments

in customization necessitates a rethinking of the

strategy of relying upon generic or standardized

applications. Moreover, investments of time, money,

and effort in developing customized applications hold

the potential to accrue greater benefits through real time

information access to externally maintained informa-

tion made more readily available through the prolifera-

tion of Internet-based technologies.

From the vendor perspective, this research lends

credence to the notion that economies of scale accrue to

R. Klein / Journal of Operations Management 25 (2007) 1366–13811378

firms through the replication of technology and

solutions (Kogut and Zander, 1992). Consider Federal

Express’ 2002 acquisition of Trade Networks, formerly

an arm of McGraw-Hill Publishing (Godes, 2005).

Trade Networks provides customs brokerage, global

ocean and air cargo distribution, as well as other value-

added services offering clients assistance with interna-

tional shipping needs. Trade Networks aided the

publishing house’s international inventory flows, but

emerged as viable business offering for FedEx.

Additionally, the current study points to the benefits

accrued to the vendor through client customization of

repeatable solutions within the context of the client/

vendor relationship. By seeing clients ‘‘get the most out

of solutions we offer’’, as one of the research site’s

marketing executives put it, vendors see greater

performs outcomes and benefits out of the relationship.

Providers need to foster environments allowing clients

to make the most of solutions, focusing on becoming

strategic partners, enhancing clients’ value chains.

Clients’ customization efforts require greater tech-

nical capabilities (Thompson and King, 1997) poten-

tially necessitating increased access to the outside

knowledge stocks of business partners (Carlile and

Rebentisch, 2003). From a practical perspective, the

presence of greater access to partner expertise yields

higher levels of inter-organizational customization and

subsequent real time information access. Vendors

possess the ability to help clients build requisite

systems in an effort to enhance relational benefits

aimed at improving clients’ value chains (Gulati and

Kletter, 2005). Whereas knowledge exchanges may take

the form of technical assistance with proprietary vendor

solutions, one firm noted that the service provider’s

guidance aided in developing strategies based upon

prior experiences with other clients’ implementations.

Finally, effective governance, as measured through

trust (Nooteboom et al., 1997; Das and Teng, 1998),

plays a role in the evolution of inter-organizational

supply chain relationships (Dyer and Singh, 1998). The

vendor within the study noted the need to ensure that

product/service utilization carefully considered clients’

‘‘ability’’ as a potential factor in success. The lack of

significant effects between clients’ perceived trust in the

service provider and customization could be attributed

to a number of issues including individual client

operating necessities and the research site’s position

within the logistics industry. Customization efforts on

the part of clients utilizing integrated eBusiness

solutions might represent an endeavor aimed at meeting

specific organizational needs. Firms noted pursuing

customizations and achieving real time information

access in an effort to better serve their own clients and

offer value added services. Additionally, this study

surveyed independent contacts within a single vendor

who commands a dominant position within the logistics

industry potentially making trust a less significant factor

in the overall vendor selection process.

7. Conclusions, limitations, and further research

This research examines eBusiness supply chain

management relationships between service providers

and clients focusing on the performance impacts of (1)

the level of customization implemented by clients and

(2) the subsequent real time information access

achieved with respect to operational information

maintained by service providers. A dyadic survey of

a logistics service provider and 91 clients finds that both

can realize increased performance outcomes from

greater levels of client customization and access.

Moreover, the provider’s level of trust in clients has a

positive direct effect on information exchange behavior

with clients, and in turn the exchange behavior has a

positive impact on clients’ level of customization.

Examining an outsourced logistics service provider

limits the potential generalizability of results to

similarly structured outsourced business relationships

as these settings might differ from other inter-firm

relationships. Moreover, the findings might not be

generalizable outside of the logistics industry, as the

nature of this supply chain activity might be unique

with different results realized in different functional

areas, such financial transaction processing. Addition-

ally, technological solutions available in the context of

the current service provider and client relationships

might uniquely define customization and direct

information access efforts. Future research should

examine other relationship settings, focusing on such

aspects as governance structures and control mechan-

isms. Moreover, research endeavors need to explore

other industry settings and/or supply chain functions.

Finally, future research should examine specific

technical capabilities and technological innovations

exploited in a broad spectrum of eBusiness supply

chain initiatives.

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