Information & Management 49 (2012) 5867

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Information & Management

journal homepage: www.elsevier.com/locate/im

Information sharing and business systems leveraging in supply chains:

An empirical investigation of one web-based application
InduShobha Chengalur-Smith a,*, Peter Duchessi a,1, J. Ramon Gil-Garcia b,2
a
School of Business, University at Albany, State University of New York, 1400 Washington Avenue, Albany, NY 12222, USA
b
Centro de Investigacion y Docencia Economicas, Carretera Mexico-Toluca No. 3655, Col. Lomas de Santa Fe, Mexico, D.F. 01210, Mexico

A R T I C L E I N F O A B S T R A C T

Article history: Web-based supply chain applications promise to provide information sharing capabilities that will
Received 1 October 2008 enhance the participating organizations information capabilities and business benets. We performed
Received in revised form 1 April 2011 an empirical study of a sophisticated Web-based supply chain application to determine the effect of such
Accepted 1 December 2011
information sharing and business systems leveraging on business benets. We also examined the
Available online 16 December 2011
importance of relational concurrence (i.e., shared business interests among supply chain partners), as an
antecedent to both information sharing and business systems leveraging. Our work showed that both
Keywords:
information sharing and business system leveraging provided important business benets and that
Web-based supply chain applications
relational concurrence was only marginally related to information sharing and not at all related to
Supply chains
Resource based view of the rm business systems leveraging, limiting the signicance attributed to this factor in prior research on inter-
Information sharing organizational systems.
Business systems leveraging Published by Elsevier B.V.
Relational concurrence
Business benets

1. Introduction other improvements that enhance business performance, includ-

As use of the Internet and the Web increases in sophistication,
companies are deploying Web-based supply chain applications to
enhance their operations, improve business performance, reduce
inventory costs, etc. Web-based electronic data interchange, supply
chain applications, and private and public exchanges are examples
of such systems. Wal-Mart, Dell, and Procter & Gamble are just a few
companies with Web-based supply chain applications that state that
they have improved their planning, forecasting, and replenishment
processes [12]. Generally, the improvements are predicated on
sharing information and leveraging information systems, thereby
broadening information capabilities and increasing the degree of
digitization of previously manual business activities.
Researchers have examined information sharing and systems
integration in supply chains from several perspectives, including
information sharing requirements [16], hardware and software
integration [17], transaction costs [10], and organizational
readiness. For them, information sharing and systems integration
are either an end in themselves, or they serve as antecedents to
* Corresponding author. Tel.: +1 518 442 4028; fax: +1 518 442 4975.
E-mail addresses: shobha@albany.edu (I. Chengalur-Smith),
PDuchessi@uamail.albany.edu (P. Duchessi), joseramon.gil@cide.edu
(J.R. Gil-Garcia).
1
Tel.: +1 518 442 4945.
2
Tel.: +52 55 5727 9800.
ing increased sales, improved business processes, and reduced
supply chain costs [14].
Some supply chain applications, collect and store data about all
the supply chain participants and their activities in a centralized
database and make it readily available to the participants through a
Web browser. This imparts integrative qualities and consequently
improves mutual knowledge, including instant sharing of demand,
inventory, and shipping information. Because data about supply
chain participants and their activities are centralized and readily
available through these integrative applications, companies are
less likely to experience problems in integrating their systems in
order to transfer and share data throughout the supply chain.
There has been little empirical research on Web-based supply
chain applications with such integrative qualities and their
associated business benets. For these supply chain applications,
we hypothesized that two information capabilities, information
sharing and business systems leveraging, with relational concur-
rence acting as an antecedent to them, are essential in order to
attain important business benets. In our model, information
sharing is primarily the degree to which supply chain participants
share supply chain information via the Web-based supply chain
application; business systems leveraging is the degree to which
companies combine their business systems, including the supply
chain, and use them to execute orders; and relational concurrence
is the degree of shared business interests. Companies that combine
or conjoin business systems, either partially or totally, broaden

0378-7206/$ see front matter . Published by Elsevier B.V.

doi:10.1016/j.im.2011.12.001
 I.S. Chengalur-Smith et al. / Information & Management 49 (2012) 5867
their information capabilities, allowing them to support more
business functions and processes than is possible with disjointed
applications. Thus, business systems leveraging is more than
systems integration, the integration of hardware, software, and
negotiated standards that permit data and information access and
exchange. Systems integration may result in a short-term
competitive advantage, while business systems leveraging is likely
to lead to a sustainable competitive advantage due to its limited
substitutability, imitability, and mobility, but the commercial
availability of applications does not prevent businesses from
making their information capabilities and accrued benets readily
available to other companies. Consequently, companies may have
to take other actions, such as leveraging their business systems to
broaden their information capabilities and solidify their perfor-
mance gains.
Our work focused on a model that relates, as an antecedent, a
relational concurrence construct to two information capabilities
constructs: information sharing and business systems leveraging,
and each of these two constructs to a business benets construct.
Our work is different from previous efforts in three respects. First,
the Web-based supply chain application under investigation, GE
Operations Global VMI (vendor managed inventory), known as
GEOPS, stores data about multiple supply chain participants and
their activities in a centralized database, which gives the
application integrative qualities, allowing it to provide instant
information sharing and connectivity with little or no systems
integration. Consequently, we model information sharing per se,
without the need to include a system integration construct that
encompasses extensive modications to hardware and software
components, computing standards, and organizational roles and
responsibilities, as other researchers have done in the past, and
relate information sharing to business benets. Second, with
GEOPS, we consider the value added by combining or conjoining
other business systems. Companies may gain considerable
business benets from using multiple business systems in
conjunction with one another [18]. Consequently, we relate
business systems leveraging to business benets. Third, we
examine the relevance of relational concurrence the degree of
shared business interests as an antecedent to both information
sharing and business systems leveraging. Relational concurrence
may be a necessary condition for both information sharing and
business systems leveraging.
2. The research model
Supply chain management research has focused on solving
specic operational problems and on operational improvements
that incorporate specic technologies, including EDI [6], e-
procurement systems, and vendor managed inventory systems.
Recent work has focused on the development of supply chain
capabilities that link a company with its suppliers and customers
to create value for all involved companies [7]. Generally, this
literature incorporates the resource based view (RBV) of the rm
for studying companies ability to deploy IT to obtain business
benets.
According to RBV theory, resources are assets and capabilities
that allow companies to respond to external opportunities and
threats. Assets, both tangible and intangible, are anything that
improves business processes, while capabilities are repeatable
patterns of actions in the use of assets [20]. The assets can be
technological (e.g., IS), organizational (e.g., organizational
arrangements), and/or environmental (e.g., suppliercustomer
relationships) in nature. Capabilities tend to be company-specic
and embedded in the companys organizational structures and
business processes. Companies may use IT assets alone or
combine them to develop information capabilities, including
59
improved information sharing, process execution, and demand
sensing, which, in turn, provide operational, nancial, and other
business benets. Some researchers have referred to these as
online information capabilities [1]; however, we consider them as
just information capabilities, recognizing they can also be ofine
(e.g., analysis of customer data). Thus, there are two approaches
that companies may use to provide information capabilities: (1)
implement business systems alone, or (2) combine or conjoin
business system, either partially or totally. The rst provides
companies with information capabilities that are related to the
application, while the second may permit companies to broaden
their information capabilities and thus provide more extensive
support for business processes and functions. Our study consid-
ered just information sharing as an information capability,
recognizing that there were other information capabilities.
The application, or business system, GEOPS, stores data about
supply chain participants and their activities in a centralized
database and makes it readily available to participants through a
Web browser. As a result, all suppliers and customers in a supply
chain may instantly share demand, inventory, and other data
without having to deal with systems integration issues. After a
company acquires GEOPS, it decides with whom to share data.
Thus, the GEOPS information sharing construct regulates the
degree to which supply chain participants have access to and share
important supply chain information. Thus, systems integration is
not an antecedent to information sharing.
Concerning the second approach, the business systems
leveraging construct represents the degree to which companies
combine (conjoin) multiple business systems to develop broader
information capabilities and the degree to which companies use
those systems to execute business processes. Companies that
conjoin business systems and broaden their capabilities are able
to support their business processes, including supply chain
processes, and business functions. According to RBV theory, both
approaches should provide operational, nancial, and other
business benets. Thus, the business benets construct repre-
sents the degree to which companies realize these business
benets through improved information sharing and business
systems leveraging.
In our study we also included a relational concurrence
construct, as an antecedent to both information sharing and
business systems leveraging. This was a new construct and
represented the degree of shared business interests. Although
relational concurrence did not arise from RBV theory, research on
various facets of relational concurrence (e.g., relationships
between supply chain partners, joint planning, and joint investing)
have suggested that relational concurrence may foster information
sharing and business systems integration. Thus, we included it as
an antecedent to information sharing and business systems
leveraging. Because we model relational concurrence as an
antecedent to both information sharing and business systems
leveraging, we did not have to consider information sharing and
business systems leveraging as mediators for relational concur-
rence, though we did test for a direct effect between relational
concurrence and business benets.
Finally, to account for the potential of rival hypotheses, our
research model included several control constructs that could
affect business benets. These constructs accounted for differences
in industry practice and company size.
As we have overviewed the underlying theory for each of the
models primary constructs, information sharing, business
systems leveraging, business benets, and relational concur-
rence we can now develop each construct, discuss their
relationships (e.g., between information sharing and business
benets), and list the associated hypotheses for our research
model (see Fig. 1).
60 I.S. Chengalur-Smith et al. / Information & Management 49 (2012) 5867
Information
Size
Sharing
Relational
Business
Benefits
Concurrence
Business
Industry
Systems
Practice
Leveraging
Fig. 1. Research model.
2.1. Business benets
Business benets are the degree of operational (e.g., more
efcient planning and replenishment and increased availability of
material resources), nancial (e.g., reduced supply chain and
inventory costs), and other advantages that companies realize
through improved information sharing and business systems
leveraging. Operational and nancial benets arise from a
companys ability to share information and leverage business
systems, both within the company and across multiple companies.
Companies that share information have increased visibility of their
activities and thus are able to coordinate replenishment more
effectively and streamline the ow of goods and services [9].
Companies that leverage their e-business applications broaden
their information capabilities and are able to implement more
sophisticated supply chain practices that result in lower invento-
ries, fewer stock outs, and lower costs. The supply chain practices
include the integration of both physical and nancial ows.
Information sharing and business systems leveraging may provide
important operational and nancial benets, including improved
on-time delivery and productivity.
2.2. Information sharing
Information sharing is the degree of access to and sharing of
important supply chain information between a company and its
supply chain partners. This information includes forecasts;
manufacturing schedules, as reected in inventory drawdown
rates; and inventory data at upstream locations. Companies that
share manufacturing and replenishment schedules can improve the
coordination of supply chain activities, material requirements, and
planning roles and responsibilities. Similarly, companies that share
inventory information can reduce inventories across the supply
chain. By sharing information, companies are substituting informa-
tion for inventory and other resources. Companies that share
important information, such as forecasts, manufacturing schedules,
and on-hand inventory balances, increase the visibility of present
and future material and manufacturing requirements. With better
visibility, companies can manipulate their manufacturing opera-
tions to achieve economies of scale, coordinate inventory replen-
ishment, and optimize deliveries. Increased visibility of material
usage reduces the distortion of actual demand, allowing companies
to run more efciently without jeopardizing customer service
objectives. Then companies can produce product based on customer
need. Moreover, companies do not have to hold more raw material
and nished goods inventory than required to protect themselves
against uncertainties in supply and demand. Increased information
sharing also improves utilization of facilities and cash ow and
improves customer service.
Consequently, as an information capability via GEOPS, infor-
mation sharing should produce important operational and
nancial business benets. Hence, we hypothesized:
H1. Information sharing is positively related to business benets.
2.3. Business systems leveraging
Business systems leveraging is the degree to which companies
conjoin their business systems, including GEOPS, and use them to
execute their supply chains. Companies need to combine data and/
or business systems and use the ensuing capabilities to improve
supply chain integration and performance; mere data and systems
integration are insufcient. In a similar way to Hong and Kim [8],
we considered three crucial aspects of leveraging: the capability of
integrating data within business systems, integrating processes
and systems with business partners, and integrating IS output
across the supply chain. Companies that integrate and use business
systems to improve supply chain performance are going beyond
simple systems integration and are leveraging their business
systems improve supply chain performance. Some authors refer to
this as digitization of business activities.
Companies that combine business applications are performing
more business activities in an integrated, electronic environment
than would be possible through a single application. Without
leveraging business systems, companies are likely to develop
islands of automation, limiting the scope and scale of their
information capabilities and organizational impacts. Because
companies with broadened information capabilities are able to
support more of their value chains, they can reduce the cost of
performing primary and secondary value chain activities and the
cost of synchronizing those activities. When companies leverage
their business systems, they are better able to perform and
coordinate these activities, including procurement, manufacturing,
and shipping, with the needs of the supply chain. Better internal
and external coordination leads to lower inventory, less obsoles-
cence, and lower transportation costs, and thus improve its overall
productivity [21]. Companies that use their combined business
systems to execute their supply chains can coordinate their
internal and external supply chain activities and derive important
operational and nancial business benets. Hence,
H2. Business systems leveraging is positively related to business
benets.
Although commercially available business systems, like GEOPS,
may improve a companys effectiveness and/or efciency, they
may not be rare (i.e., they are available to other companies) and
they may be appropriable (i.e., consequent benets are fully, or
partially, controlled by a third party). Thus to maintain information
capabilities and the consequent business benets, companies
should make it difcult for competitors to imitate the system by
ensuring it has a unique history, causal ambiguity, and/or social
complexity, limited use of equivalent resources, and limited
transferability. Companies may thus prevent their benets from
being replicated or appropriated. Others (e.g., [19]) discuss how
exploitative uses of IT that involve supply chain management
systems enable changes in business processes and subsequent
attainment of business benets. Thus, companies may benet from
leveraging business systems to enhance their ex ante and ex post
strategic importance and derive business benets.
2.4. Relational concurrence
Relational concurrence is the degree of shared business
interests between suppliers and customers, as reected in the
amount of cross investing, satisfaction of mutual needs, and the
 I.S. Chengalur-Smith et al. / Information & Management 49 (2012) 5867
importance placed on the customersupplier relationship. The
literature considers the nature and degree of relationships
between supply chain partners to be an important factor in
understanding supply chain mechanics. Besides transaction cost
economics, sociological factors inuence the relationships be-
tween supply chain participants. Relational exchange theory
suggests that relational norms (e.g., participation, communication,
and trust) promote information sharing in supply chains.
Research has shown that relational norms, including coordination
and cooperation, are important for promoting information sharing
and communication between supply chain participants, with trust
as a particularly important relational norm for e-business
applications that link companies. Trust fosters the development
of long-term relationships and reduces the need for other
governance mechanisms, including long-term contracts. Manifes-
tations of trust between a supplier and a customer are a hallmark of
successful relationship management. A long-term relationship
based on inter-dependence and relational symmetry engenders
trust and condence in both parties and may result in information
sharing.
Web-based supply chain applications may affect the degree of
supplier interdependence and power such applications permit
continuous visibility of internal data, companies are more apt to
deploy such Web-based applications when they value their
partners, receive mutual benets, and share investments. More-
over, the sharing of supply chain resources promotes shared
decision making, collaboration, and know-how exchange among
supply chain partners including both explicit and tacit knowledge.
Relational concurrence based on shared interests, rather than
formalization, centralization, and opportunism, is more likely to
foster information sharing and systems leveraging.
Consequently, companies with relational concurrence are likely
to share information via a Web-based supply chain application and
leverage the Web-based supply application with other business
systems to expand their information capabilities. Hence,
H3. Relational concurrence is positively related to information
sharing.
H4. Relational concurrence is positively related to business sys-
tems leveraging.
2.5. Control variables
Given our set of focused relationships, we incorporated two
control variables: industry practice and size. We included industry
type as it has been shown to impact the diffusion and business
value created by IT, through differences in adoption rates and
capabilities [15]. We included a construct that measured the
environmental predisposition to share information and leverage e-
business applications. In general, the amount of IT a company uses
is dictated by the IT usage of its customers and suppliers and the
quality of its IT infrastructure. With regard to industry size, we
used a construct that incorporated sales and number of employees.
Large companies have more resources to accomplish supply chain
initiatives and more power to inuence the outcomes of their
initiatives than small companies.
3. Research methods
We selected a Web-based supply chain application, GEOPS, as
the setting for testing our research model. We made this choice
because GEOPS is a Web-based application that links suppliers
and customers with no changes to existing hardware and
software, existing skill base, and organizational roles and
responsibilities.
61
3.1. Research setting
The GEOPS business system stores data about supply chain
participants and their activities in a centralized database and
makes it available through a Web browser; it is a service that
suppliers and customers purchase from GE Operations. In its
supply chains, GE Operations is just a service provider and, unlike
an intermediary or a broker, GE Operations has no special status,
role, or authority to inuence the adoption decision. Once the
application has been bought by a company, it decides on the
suppliers and/or customers with whom to share data. GEOPS
employs electronic sensors at various points in a supply chain to
collect and store data about supply chain participants and their
activities, stores the data in the database, and provides instant
access to it. Companies require just a Web browser to gain access to
the data and the supply chain information, including inventory
levels, demand forecasts, and shipments. The sensors are able to
measure raw material inventories at Six Sigma quality levels and
sensor installation and commissioning is a relatively straightfor-
ward process. Because data and information about supply chain
participants and their activities are centralized and readily
available, systems integration is not a major concern.
Order fulllment users at supplier locations and purchasing
users at customer locations can view actual demand, or draw
down, at all silos and inventory locations; consumption forecasts
and on-hand balances; and shipments in progress (see Fig. 2).
Users can receive alerts if inventory exceeds predetermined levels
and download all data into their ERP systems. Because of its
integrated architecture, GEOPS permits, if authorized by suppliers/
customers, access to inventory data and information at upstream
and downstream locations. For example, a supplier at the
beginning of a supply chain can view its customers inventory
data and information, its customers customers inventory data and
information, etc. GEOPSs functionality provides connectivity and
supply chain visibility. In addition, GEOPS using companies can
consider instituting vendor managed inventory programs where
the suppliers not the customers decide when and how much
stock to replenish, given their on-hand balances and draw down
data.
GEOPS is also different from ERP and CPFR applications. ERP
applications provide multiple templates for dening and imple-
menting formal business processes within one company. Addi-
tionally, ERP applications generally contain internal data and limit
their functionality to activities primarily within the company. CPFR
is a multi-step, best-practice framework for a supplier and a
customer to develop formal policies and business processes that
can build consensus sales forecasts, establish replenishment plans,
and manage structured workows. Together, a supplier and
customer create a cooperative replenishment strategy that aligns
objectives and processes and dene technical standards for Web-
based communication; it requires numerous periodic even daily
interactions between several teams in each company, including
forecasting, purchasing, and materials management teams.
3.2. Questionnaire design
We developed an initial draft questionnaire based on a
literature review, our experience, and discussions with business
leaders from GE Operations and GE Global Research, who had
signicant supply chain and IT applications experience. The
questionnaire contained both validated items from previous
research and items specic to Web-based supply chain applica-
tions. Through a long series of discussions, we pared the items to a
manageable number and created two questionnaires: one for buy-
side (i.e., customer) and one for supply-side (i.e., supplier)
respondents. The questionnaires contained the same items with
62 I.S. Chengalur-Smith et al. / Information & Management 49 (2012) 5867
Fig. 2. Screen Shot of silo summary showing upper and lower limits and inventory drawdown.
only minor modications to customize the questions for each
group of respondents.
As a pretest, we asked over a dozen buy- and supply-side users
to review the questionnaire, add items, delete items, rephrase
questions, arrange the items into natural groups, and record the
amount of time to complete the questionnaire. The pretest
provided item-by-item insight into critical issues, including
important steps, activities, and relationships, overall organization
of the questionnaire, and correct wording of items. We then further
modied the questionnaire, reducing its length, and rephrasing
items. We establish content validity via the literature review, our
collective expertise, and the formal pretest process, which
primarily gleaned the questionnaires items from both GE
Operations Business Leaders and clients. This process of ne-
tuning the questionnaires resulted in a parsimonious list of
questions that could be completed in about 1015 min.
3.3. Construct operationalization and measurement
Our model required the determination of the constructs, their
associated items, and the hypothesized relationships between the
constructs and items. We modied some previously validated
items and also created some new items that were related to GEOPS
specic information capabilities and business benets. For
example, based on our denition of information sharing, we
added the following information sharing items to the question-
naire: We share long-term forecasts with our supplier, We
share our manufacturing schedules with our supplier, and We
have access to inventory data at locations that supply our
supplier. Also, based on our denition of business systems
leveraging, we added the following business systems leveraging
items to the questionnaire: We integrated GEOPS Global VMI
inventory data with our facilitys business systems, Our facilitys
business systems are highly integrated with our suppliers
systems, and We use GEOPS Global VMI for real time integration
of our supply chain. Thus, the constructs determined the
questionnaires items. Subsequent factor analysis determined
the exact number of items for each construct. Concerning the
hypothesized relationships between the constructs, partial least
squares (PLS) analysis via path strengths was used to determine
the nature of the hypothesized relationships between constructs.
We used a seven point Likert scale for items that represented
Business Benets. The anchors for these items were 1 = very much
a benet and 7 = not any benet. We use three Likert-scaled items
each to measure the constructs for information sharing, business
system leveraging, and relational concurrence. Industry practice
was also measured by three items on a Likert scale. The ordinal
scale for these Likert items was Strongly Disagree, Disagree,
Slightly Disagree, Neither Agree nor Disagree, Slightly Agree, Agree,
and Strongly Agree. By using different scales, we attempted to
decrease item characteristic effects that could arise from using the
same scale formats. We included several other items to character-
ize the sample, including the facilitys position in the supply chain
(e.g., middle), the respondents functional area, and the amount of
experience (in months) with GEOPS. In order to reduce method
bias, although we organized the items into groups, we did not
arrange the items in any particular order in the groups.
3.4. Survey administration
Our sample was taken from the population of GEOPS business
customers a database of 543 managers and employees in a
number of connected facilities. Although our sample included
many respondents from each company, they belonged to different
facilities. Thus, the unit of analysis was actually the facility.
According to GE Operations Business Leaders, these managers and
employees were in charge of GEOPS and, as a result, were the most
informed and knowledgeable about GEOPS in their facilities. We
also targeted users from both the buy-side and sell-side of a
business, to ensure that our sample was not biased by taking the
viewpoint of a single stakeholder. We assured all respondents of
complete condentiality of their responses.
Initially, we emailed a notication of our study and forthcoming
questionnaire. Two weeks after this, we sent another email that
 I.S. Chengalur-Smith et al. / Information & Management 49 (2012) 5867 63

invited users to complete the questionnaire; it contained the Table 1

Distribution of respondents.
embedded URL and password for accessing the questionnaire on
our website. After another 2 weeks, we sent a third email that Categories Percentages
invited those who had not replied to complete the questionnaire. Functional areas
Overall, we received 89 usable responses to our solicitations, Sales/customer service/order fulllment 27
yielding a 16.3% response rate. This response rate is modest, but it Purchasing/materials management 26
is just below the recommended level of 20% for organizational Manufacturing 19
Logistics/supply chain 7
surveys and similar to the response rates of other IT-focused
Unknown 21
surveys.
Changes in the ownership of GEOPS business prevented us from Organizational levels
Managers 33
further attempts to increase the response rate. It also prevented Non-managers 67
telephone follow-up interviews to assess reasons for non-response
that may be specic to our study (e.g., poor questionnaire design). Sales
Less than $500 million 34
In lieu of polling non-respondents, to assess the degree of non- $500 million to less than $1 billion 18
response bias, we compared the rst and second response sets $1 billion to less than $5 billion 12
using a number of critical items. We examined some key $5 billion and over 9
background variables across the two sets: the proportion of Unknown 27
buyers and sellers (no signicant differences, p-value = 0.2), the Number of employees
position of the responding organization in the supply chain, i.e., Less than 5000 48
beginning, middle, and end (no signicant differences, p- 500050,000 28
50,000 and over 7
value = 0.51), managerial status of the respondent (no signicant
Unknown 17
differences, p-value = 0.485), and size indicators: number of
employees and total sales (no signicant differences, p-val- Position in the supply chain
Beginning 54
ue = 0.234 and 0.278, respectively). Thus we found no systematic Middle 34
difference between the rst and second response sets and End 12
concluded that non-response bias was not signicant.
Number of suppliers/customers linked via GEOPS
We compared respondents from the sell- and buy-side of a 1 36
business, on all the Likert-scaled items. We found marginal 2 17
differences on some items. For example, buyers rated reduced 3 7
coordination and inventory costs higher (p-value of 0.035 and 4 4
5 3
0.001, respectively) than suppliers, on average. In addition,
6 or more 11
suppliers were more likely to have access to customers inventory Unknown 22
data than buyers to have access to suppliers inventory data (p-
Percentage of raw materials managed by GEOPS
value = 0.0001). Suppliers were also slightly more likely to agree
Less than 1% 6
that their relationship with their customers was important (p- 15% 14
value = 0.0276), and that their business systems were highly 510% 6
integrated with their customers business systems (p-val- 1020% 14
2050% 18
ue = 0.0681). Overall, however, no systematic differences
50% or more 11
emerged; consequently, we combined them into one sample. Unknown 31
Length of experience with VMI 6 months or less 11
3.5. Respondents Over 6 months and up to a year 37
Over a year and up to 18 months 19
Over 18 months and up to 2 years 27
The majority of our 89 GEOPS respondents were from sales and
Over 2 years 6
order fulllment (27%), purchasing and materials management
(26%), and manufacturing (19%) (see Table 1).
A little over a third (36%) of the facilities are connected to just overall psychometric properties of the scales used to measure the
one supplier/customer via GEOPS, while 11% of the facilities are models variables and a structural (inner) model analysis to
connected to six or more suppliers/customers. Interestingly, ascertain the important relationships among the variables. PLS can
although GEOPS is capable of connecting companies in any handle small sample sizes and does not impose multivariate
arrangement, most companies prefer to implement just a dyadic homogeneity and normality requirements on the data [5]. These
connection, limiting visibility to just their immediate suppliers/ aspects of PLS are especially important because our measures rely
customers. A large majority of the facilities are managing at least on ordinal data, which may not meet the homogeneity and
10% of their materials through GEOPS. About 90% of all respondents normality requirements.
have been using GEOPS for at least 6 months. Thus, our sample
contains a variety of GEOPS users from small to large facilities that 4.1. PLS measurement model results
are mostly at the start and middle of the chemical and plastics
supply chain. We ran a factor analysis with principal axis factoring and
oblimin rotation [2]. In order to determine whether the factor
4. Data analysis analysis was appropriate for our data set, we checked the Kaiser
MeyerOlkin (KMO) measure of sampling adequacy and Bartletts
We performed an exploratory factor analysis followed by PLS test of sphericity. The KMO statistic of 0.620 was above 0.500,
analysis, using PLS-Graph, to analyze the validity of the models suggesting that the data was suitable for factor analysis. Moreover,
constructs and the relationships between the constructs. PLS is Bartletts test resulted in a highly signicant chi-square statistic
well suited for analyzing highly complex predictive models with, (x2 = 927, p-value = 0.000), indicating adequate correlation among
multiple-item constructs and both direct and indirect paths. PLS the items. Thus factor analysis was appropriate for the existing
performs a measurement (outer) model analysis to ascertain the data set. The factor analysis showed that six constructs: business
64 I.S. Chengalur-Smith et al. / Information & Management 49 (2012) 5867

Table 2
Item loadings for constructs.

Constructs Items Loadings

Business benets More efcient planning and replenishment practices 0.82

Improved on-time delivery performance 0.79
Increased availability of raw materials at our site 0.79
Reduced coordination costs with our supplier 0.77
Increased productivity 0.77
Reduced supply chain costs 0.71
Reduced inventory costs 0.67

Information sharing We share long-term forecasts with our supplier 0.87

We share our manufacturing schedules with our supplier 0.86
We have access to inventory data at locations that supply our supplier 0.43

Business systems leveraging We integrated GEOPS Global VMI inventory data with our facilitys business systems 0.88
Our facilitys business systems are highly integrated with our suppliers systems 0.77
We use GEOPS Global VMI for real time integration of our supply chain 0.75

Relational concurrence We encourage cross-investing with our supplier for major projects 0.86
We structured the relationship with our supplier to satisfy mutual needs 0.83
Our relationship with our supplier is important to us 0.53

Industry practice In our industry, suppliers and customers are linked through information technology 0.97
Information sharing is common among suppliers and customers in our industry 0.85
Alliances and partnerships are common in our industry 0.41

Size Number of employees 0.93

Companys total sales 0.93

benets, information sharing, business systems leveraging, rela-
tional concurrence, industry practice, and size together explained
68% of the total variance.
Construct validity, determined through the presence of
convergent and discriminant validity, demonstrates how well
the measurement items relate to the constructs. To demonstrate
convergent validity, we use three tests: item reliability, composite
reliability, and average variance extracted. We determined item
reliability by examining construct item loadings. In general,
loadings at or above 0.5 demonstrate adequate item reliability.
All items had loadings above 0.500, with two exceptions, We have
access to inventory data at locations that supply our supplier from
the information sharing construct, and Alliances and partnerships
are common in our industry from the industry practice construct
(see Table 2). As PLS is a non-parametric procedure, we used
bootstrapping to perform signicance testing for the loadings. The
t-statistics for the loadings of the measurement items on their
latent constructs were all signicant at the 5% level, except for the
item from the industry practice construct. However, we retained it
because it is close to the cutoff and we deemed it to be important.
Further validity analysis using PLS conrmed this decision.
Cronbachs alphas also provide evidence of composite reliabili-
ty and values above 0.6 demonstrate that it is adequate. All the
composite reliabilities for our constructs were above 0.7 and all the
Cronbachs alphas are above 0.6 (see Table 3). Finally, the average
variance extracted (AVE) represents the amount of variance a
construct captures via its items relative to the amount of variation
due to measurement error. We found that each constructs
variance extracted was above the recommended value of 0.5.
Table 3
Convergent validity analysis.
Constructs Composite Cronbachs
reliabilities alphas
Business benets 0.91 0.88
Information sharing 0.78 0.62
Business systems leveraging 0.84 0.72
Relational concurrence 0.79 0.64
Industry practice 0.81 0.74
Size 0.93 0.83
Thus we concluded that all our constructs had satisfactory
convergent validity.
We used two tests for discriminant validity: comparison of item
loadings with item cross loadings and comparison of the variance
extracted from the construct with shared variance. Each item
should load more highly on its intended construct than on other
constructs [4]. We found that all our items satised this condition
(see Table 4). Secondly, a constructs variance extracted, or shared
variance between the construct and its items, should be greater
than the shared variance between the construct and other
constructs; this was measured by comparing the square root of
a constructs average variance extracted (AVE) to its correlations
with other constructs. For each construct, we observe that the
square root of the AVE is considerably larger than its correlations
with other constructs (see Table 5). Consequently, our constructs
demonstrate adequate discriminant validity.
4.2. PLS structural model results
We next examined the overall explanatory power of the
structural model, the amount of variance explained by the
independent variables, and the magnitude and strength of its
paths, where each of our hypotheses corresponds to a specic
structural model path.
We used R2 to measure the models explanatory power,
interpreted in the same way as for regression analysis. The explained
variation should exceed 10% to qualify for suitable explanatory
power. The analysis revealed that the structural model explained
about 20% of the variation in Business Benets, suggesting that the
structural model provided adequate explanatory power. We used
bootstrapping with 200 re-samples to obtain the t-statistics for
testing the statistical signicance of the models paths/relationships.
(Ideally, the paths should be at or above 0.2, have signicant t-
AVE
statistics, and be directionally consistent with expectations.)
The path between information sharing and business benets was
highly signicant (t = 2.72, p = 0.007), fully supporting Hypothesis 1
0.58
0.56 (see Fig. 3). The path between business systems leveraging and
0.64 business benets was also highly signicant (t = 3.05, p = 0.003),
0.57 conrming Hypothesis 2. Thus, the two information capabilities
0.60
considered here positively affected businesses. The path between
0.86
relational concurrence and information sharing was moderately
 I.S. Chengalur-Smith et al. / Information & Management 49 (2012) 5867 65

Table 4
Item loadings and cross loadings.

Items Benets Information System Relational Industry Size

sharing leveraging concurrence practice

More efcient planning and replenishment practices 0.82 0.37 0.19 0.29 0.02 0.09
Improved on-time delivery performance 0.79 0.27 0.18 0.03 0.02 0.03
Increased availability of raw materials at our site 0.79 0.37 0.15 0.15 0.03 0.03
Reduced coordination costs with our supplier 0.77 0.15 0.17 0.10 0.05 0.01
Increased productivity 0.77 0.24 0.38 0.10 0.10 0.04
Reduced supply chain costs 0.71 0.21 0.30 0.18 0.29 0.00
Reduced inventory costs 0.67 0.13 0.24 0.10 0.19 0.28
We share long-term forecasts with our supplier 0.29 0.87 0.01 0.29 0.22 0.12
We share our manufacturing schedules with our supplier 0.28 0.86 0.15 0.16 0.21 0.08
We have access to inventory data at locations that supply our supplier 0.17 0.43 0.22 0.03 0.09 0.10
We integrated GEOPS Global VMI inventory data with our facilitys business systems 0.31 0.09 0.88 0.14 0.30 0.18
Our facilitys business systems are highly integrated with our suppliers systems 0.20 0.16 0.77 0.05 0.33 0.10
We use GEOPS Global VMI for real time integration of our supply chain 0.22 0.06 0.75 0.17 0.19 0.20
We encourage cross-investing with our supplier for major projects 0.12 0.24 0.17 0.86 0.30 0.24
We structured the relationship with our supplier to satisfy mutual needs 0.26 0.19 0.10 0.83 0.19 0.04
Our relationship with our supplier is important to us 0.01 0.11 0.04 0.53 0.09 0.11
In our industry, suppliers and customers are linked through information technology 0.15 0.15 0.39 0.25 0.97 0.05
Information sharing is common among suppliers and customers in our industry 0.07 0.40 0.16 0.29 0.85 0.00
Alliances and partnerships are common in our industry 0.00 0.13 0.24 0.34 0.41 0.15
Number of employees 0.04 0.10 0.21 0.19 0.05 0.93
Companys total sales 0.04 0.07 0.17 0.15 0.02 0.93

Items in bold are loadings.

Table 5
Construct correlations with the square root of AVE along the diagonals.

Business benets Information sharing Business systems leveraging Relational concurrence Industry practice Size

Business benets 0.762

Information sharing 0.335 0.75
Systems leveraging 0.309 0.12 0.80
Relational concurrence 0.178 0.25 0.16 0.76
Industry practice 0.131 0.25 0.34 0.28 0.78
Size 0.045 0.09 0.21 0.19 0.04 0.93

signicant (t = 2.39, p = 0.018), upholding Hypothesis 3. However, information sharing and business systems leveraging were not
the path between relational concurrence and business systems mediators.
leveraging was insignicant (t = 1.43, p = 0.154), rejecting Hypothe-
sis 4. Finally, neither of the control variables, namely industry 5. Discussion
practice and size, had signicant paths, ruling out alternative
explanations for the results. We also tested a model that included Our results suggest that integrative Web-based supply chain
relational concurrence as the only predictor of business benets and applications, specically GEOPS alone and a combination of
it yielded a path coefcient of 0.274 (t-statistic = 1.6 and p- business systems, including GEOPS, provide information capabili-
value = 0.11). Thus, we concluded that there was no evidence of a ties that result in valuable business benets, namely more efcient
direct path from relational concurrence to business benets, as the planning and replenishment, improved on-time delivery perfor-
literature and our model suggested. One of the conditions for mance, reduced coordination costs with suppliers and customers,
mediation is that both direct and indirect paths exist. Since there was increased availability of raw materials, reduced supply chain costs,
no direct path from relation concurrence to business benets, reduced inventory costs, and increased productivity. For example,
with GEOPS alone, over 66% of the companies in our sample
reported more efcient planning and replenishment and improved
on-time delivery performance, and over 50% of the companies
Information
Size reported reduced coordination costs with suppliers and customers
Sharing
and increased availability of raw materials. Thus, it pays to
0.12
0.29* (1.14) implement Web-based supply chain applications.
(2.39) Concerning information sharing, GEOPS allowed sharing of
0.33**
(2.72) important supply chain information with suppliers and customers.
Relational Business By sharing information, suppliers and customers increase supply
Concurrence Benefits
chain visibility, allowing them to perform supply chain activities
0.32** efciently, effectively satisfy material requirements, and compre-
(3.05)
hensively plan manufacturing and replenishment schedules. Yet,
0.17 0.03 only 56% of the respondents invested heavily in IT to enable supply
(1.43) Business (0.34) Industry
Systems
Practice
chain improvements, specically increased visibility. This is
Leveraging surprising, considering the nature and degree of benets to be
gained from successfully implementing this and other Web-based
Fig. 3. Results of Structural Model with path coefcients (associated t-statistics are applications that provide information sharing capabilities.
in parentheses). *Indicates signicance at the 0.05 level. **Indicates signicance at Only 6% of the respondents reported that they have access to
the 0.01 level. inventory data at upstream locations beyond that of their
66 I.S. Chengalur-Smith et al. / Information & Management 49 (2012) 5867
immediate suppliers. This item loaded albeit marginally with
information sharing, suggesting that companies could be missing
some important business benets by not using this integrative and
expansive information capability. Others [3] have found that
companies rst need to develop close partnerships with other
companies, before they are willing to share template based
information, and eventually escalate to more pro-active informa-
tion sharing. Clearly, information sharing is extremely important
in a supply chain. However, though it provides a competitive
advantage at rst, it is not sustainable and thus, companies have to
broaden their information capabilities using other means.
Companies that combine or conjoin their business systems,
including their Web-based supply chain applications, stand to gain
important business benets. With broader information capabilities
in play, companies can enable more supply chain activities,
develop leaner organizational arrangements (e.g., smaller, but
equally effective purchasing staff), and realize important business
benets, including reduced inventory costs, reduced supply chain
costs, and increased productivity. By increasing the amount of
digitization, these companies are increasing the extent to which
they conduct both internal and external supply chain activities in a
fully electronic environment.
Almost 70% of the respondents report that they modied their
supply chains during the GEOPS implementation. Apparently
many companies are using their newly acquired information
capabilities with other business systems to provide process
improvements. Finally, companies that encourage cross-investing
in IT projects, structure their supplier and customer relationships
to satisfy mutual needs, and consider customer and supplier
relationships as being important are very likely to share
information with one another. Commonality of interests is
generally required to develop meaningful relationships. In fact,
98% of the respondents admitted that their relationship with their
partner was important to them. Although companies may be
sharing information simply because they have GEOPS, it seems
reasonable to conclude that a good working relationship based on
cross-investing, satisfaction of mutual needs, and recognition of
the importance of supplies and customers to a business are
essential for information sharing to ourish.
Yet, some companies can mandate information sharing,
especially when a large company is driving an information sharing
initiative. Only 23% of respondents reported that use of GEOPS was
mandated by either a supplier or customer. When sharing and
using information, companies risk losing control over access to and
utilization of the data and information.
Curiously, the relational concurrence items that positively
affect information sharing do little to determine the degree of
business systems leveraging. Once information sharing begins,
companies need very little (e.g., satisfaction of mutual needs) from
their suppliers and/or customers to leverage GEOPS with existing
business systems. About 60% of the respondents indicated that
they invested aggressively in IT and in redesigning both their
internal and external supply chain activities. This proactive
orientation may obviate the need for companies to have strong
relationships with suppliers and customers for leveraging IT.
Alternatively, the ease of combining GEOPS with existing business
systems may mean that companies did not need to forge a strong
relationship with suppliers and customers. Business systems that
automatically linked companies, with little or no difculty may
mitigate the importance of forging strong relationships among
suppliers and customers.
6. Limitations
Although we collected a wide range of item and benet data for
our study, our measures were self-reported and based on rating
scales. Clearly, for items and benets, hard measures are preferable
to rating scales. There are multiple sources of common method
bias and we were able to avoid only some of them during the
design of the survey. In order to reduce method bias, some
researchers (e.g., [11]) have recommended that empirical studies
use two different sets of respondents, one for capturing responses
to the independent variables and another for capturing responses
for the dependent variables. The risk of lowering the response rate
prevented us from using different target populations for the set of
independent and dependent items.
In an attempt to reduce method bias, we did not identify the
respondents by tracing them back to their facilities. This could
potentially result in over-representation of certain business
facilities, particularly the large ones. However, we did control
for size of the business facility in our analysis, thus mitigating the
effect of any resulting sampling bias. Also an analysis of our
respondent demographics showed considerable variation in size,
suggesting that we were able to capture a signicant cross-section
of the target population. Nevertheless, our approach may
introduce sampling bias into our ndings, especially given the
moderate sample size.
Our study did not include a systems integration construct as an
antecedent to information sharing because the supply chain
application stored data about supply chain participants and their
activities in a centralized database, making it readily available
through a Web browser, and thus it could interoperate with legacy
systems. Because e-business systems incorporate Internet stan-
dards, they generally link with one another regardless of the
underlying technology platforms. Many companies execute legacy
systems because of the high cost to redesign and replace them.
Consequently, for a new hybrid system (with both Web-based and
legacy systems), companies may still have to deal with system
integration issues to ensure that the systems work as one.
7. Summary and conclusions
Our empirical study revealed two important conclusions: (1)
Web-based supply chain applications provide immediate infor-
mation capabilities information sharing which yields important
business benets and (2) Web-based supply chain applications
and other business systems, when leveraged, also yield important
business benets. Consequently, companies should implement
Web-based applications that provide information capabilities and
leverage those applications with other business systems to
broaden those information capabilities, enabling more business
activities than are possible through the Web-based application
alone.
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InduShobha Chengalur-Smith is the Chair of the
Information Technology Management department at
the School of Business in the University at Albany, State
University of New York. She received her Ph.D. from
Virginia Tech and prior to joining academia she worked
in both the private and the public sectors. Her research
interests are in the areas of Open Source Software,
Technology Adoption and Implementation, Information
Quality, and Security. She serves on the Editorial Boards
of several journals including Information & Management
67
and the ACM Journal of Data and Information Quality and her research has been
published in academic journals such as Information Systems Research, European
Journal of Information Systems, Journal of the AIS, Journal of Strategic Information
Systems, Communications of the ACM, and multiple IEEE Transactions.
Peter Duchessi is an Associate Professor of Information
Technology Management at the School of Business,
University at Albany, State University of New York. He is
also the former Chair of the Information Technology
Management Department. He is an active member of
the faculty at the Lorange Institute, Switzerland and the
University del Salvadore, Argentina. His areas of
expertise include internal and external business
analyses; development and implementation of new
computer-based technologies; and service manage-
ment. He has provided consulting and management
education services to a number of notable companies
around the world, including Reexis Systems, Inc. Jet
Aviation AG, Alexanderwerk AG, GE Global Research, Siemens AG, and the World
Bank. He has over 30 peer-reviewed publications in various outlets, including
Journal of Consumer Behavior, Communications of the ACM, Interfaces, European
Journal of Operational Research, IEEE Transactions on Systems, Man, and Cybernetics,
Management Science, and the California Management Review. Additionally, he is the
author of Crafting Customer Value: The Art and Science, which Purdue University
Press publishes in four different languages.
J. Ramon Gil-Garcia is an Associate Professor in the
Department of Public Administration and the Director
of the Data Center for Applied Research in Social
Sciences at Centro de Investigacion y Docencia Econom-
icas (CIDE) in Mexico City. Dr. Gil-Garcia is member of
the National System of Researchers as Researcher Level
II. In 2009, he was considered the most prolic author in
the eld of digital government research worldwide.
Currently, he is a Research Fellow at the Center for
Technology in Government, University at Albany, State
University of New York (SUNY) and a Faculty Afliate at
the National Center for Digital Government, University
of Massachusetts Amherst. Dr. Gil-Garcia is the author
or co-author of articles in The International Public Management Journal, Government
Information Quarterly, Journal of the American Society for Information Science and
Technology, and European Journal of Information Systems, among other internation-
ally recognized academic journals. His research interests include collaborative
electronic government, inter-organizational information integration, adoption and
implementation of emergent technologies, and multi-method research approaches.