Logistics innovation:
 A literature-

based conceptual framework

Abstract

Purpose – The purpose of this paper is to develop a model of logistics innovation and see the
relationship of some variables, which include Organizational and Environmental factors, with logistics
innovation.
Design/methodology/approach – A review of the following logistics journals is conducted:
International Journal of Logistics Management, International Journal of Physical Distribution &
Logistics Management, Journal of Business Logistics, Transportation Journal, and Transportation
Research: Part E. Articles for the review are selected based on their explicit relevance to logistics
innovation.
Findings – There has been a limited amount of theory-based research conducted on the topic of logistics
innovation. While past experiences and outcomes of logistics innovation has been identified within the
leading logistics journals, very little empirical testing has been done. The diffusion of logistics
innovations has also received attention in the logistics literature.
Research limitations/implications – The scope of this paper is limited to top logistics journals. Further,
theoretical development in the study of logistics innovation is acceptable. Few studies have specifically
addressed logistics innovation. The paper offers a model of logistics innovation based on a review of the
existing literature.
Keywords Innovation, Distribution management, Resource management
Paper type Literature review

1. Introduction

The world is reducing the gap. The companies are connected and they are obtaining the
raw materials and finished goods from the other side of the globe and distributing
products to countries, which were thought to be unreachable. How does this happen?
How do companies send their products to the other side of the world with
trustworthiness and certainty, have their plants set and keep products on retail shelves?
While there are several factors that can help explain this, the fact that business practices
have changed over time is evident. One such example is the use of containers for
shipping goods internationally.

In 1956, Malcom McLean shipped 58 aluminum truck bodies in frames on a ship from
Newark to Houston, marking the introduction of containerization for moving cargo on
the seas (Levinson, 2006). Prior to that time, cargo was loaded into crates for shipping
overseas requiring significant time and labor to load and unload each ship. McLean’s
new method of shipping cargo caught on quickly. Soon, ports all over the world were
designed to handle the new containers. Containerization allowed firms to dramatically
reduce transportation costs associated with importing and exporting goods, which in turn
opened new markets for sourcing and distributing product. Containers could also be
easily moved from an ocean vessel to a train or truck, allowing movement from a factory
in China to a plant in the USA in a single container. About 50 years after McLean’s first
container shipment, the equivalent of over 300 million 20-foot containers moves across
the ocean each year. McLean’s idea was not the sole factor leading to the increase in
global sourcing, but it played a significant role.

Containerization is only one example of innovating to improve logistics operations.

Over the course of time, the logistics industry has seen many examples of innovation.
The importance of finding a better way to move product was identified as early as 1776,
when Adam Smith detailed the connections between manufacturers and markets and
transportation inefficiencies in The Wealth of Nations (Donovan, 2004). Since then, we
have seen the steam engine, containerization, electronic data interchange (EDI), cross-
docking, radio frequency identification (RFID), and many other innovations in the field
of logistics.

The purpose of this paper is to examine logistics innovation through a review of the
leading logistics journals. Within the review, a definition of logistics innovation is
offered, along with a proposed model based on variables presented in previous studies
and conceptual frameworks. The review will also present findings from previous studies
to provide a more thorough understanding of logistics innovation.

The Council of Supply Chain Management Professionals defines logistics as:

[. . .] the process of planning, implementing, and controlling procedures for the efficient and
effective transportation and storage of goods including services, and related information from
the point of origin to the point of consumption for the purpose of conforming to customer
requirements.

An effective logistics operation can provide a competitive advantage for a firm and
increase a firm’s market share (Daugherty et al., 1998; Mentzer et al., 2001). Logistics
has also been shown to enhance customer value and logistics executives believe that it
adds value to a firm’s output (Novack et al., 1996; Stank et al., 1998). Much of this
value is generated from the ability to reduce costs and provide delivery solutions
according to customer needs.

While the opportunity to create a competitive advantage through logistics has inspired
researchers to consider various factors leading to higher levels of logistics performance,
the broader concept of innovation has not been addressed in great detail within the
leading logistics journals. In 2005, Flint et al. pointed out that logistics research has
largely ignored innovation. This is especially true when looking at logistics innovations.
The literature does address logistics technologies (EDI, RFID, etc.) and logistics
programs (vendor-managed inventory, cross-docking, etc.) and their roles in logistics
operations and relationships, but there remains a significant gap in terms of research
aimed at understanding drivers of logistics innovation and the specific benefits of this
type of innovation. Many logistics innovations are of particular interest due to their cost-
cutting nature, which can be difficult for competitors to detect and imitate. Further,
theoretical development, understanding, and application of logistics innovation are
warranted.

Before continuing with this review, the reader should understand what is meant by
logistics innovation. Innovation has been broadly defined as an idea, practice, or object
that is perceived as new by an individual or other unit of adoption (Rogers, 1995).
Logistics innovation refers to any logistics-related service that is seen as new and elpful
to a particular focal audience (Flint et al., 2005). Logistics innovations can be very basic
to very complex and can be applied to internal operations or services with business
partners (Flint et al., 2005).

The paper begins with an overview of theoretical approaches to innovation. This is

followed by a discussion of the methodology used for the literature review. The next
section introduces a conceptual model and goes on to discuss the articles from which the
relationships were derived. The section identifies constructs from the logistics literature
used to predict logistics innovation along with the outcomes of logistics innovation. This
is followed by discussions of limitations and the research and managerial implications of
the literature review.

2. Theoretical applications to logistics innovation

Theories aid researchers in the prediction and understanding of phenomena – the two
primary goals of scientific research (Dubin, 1978). The process of building theories
relies on previous literature; theory is developed through incremental testing and
extension (Kuhn, 1970). There is no single theory of innovation to draw upon to
understand how innovation happens or to explain its internal and external consequences.
Researchers looking at logistics innovation should consider and test a variety of theories
to help explain and understand innovation in the logistics context.

The development and testing of theory is an area in which the logistics innovation
literature is poised for expansion. Innovation has been addressed in many contexts
outside of the logistics literature and the theoretical development from those studies
should be considered for application in a logistics setting. A review of innovation
literature outside the scope of logistics innovation reveals theoretical frameworks that
have shown promise in the study of innovation. A sample of these frameworks includes:

 The knowledge-based view of the firm centers on knowledge as the most

important resource of the firm. The uniqueness of a firm’s knowledge is
 fundamental in the firm’s ability to develop a sustained competitive
advantage (Grant, 1996; Turner and Makhija, 2006).
 The dynamic capabilities framework was born out of the resource-based
view of the firm. The dynamic capabilities framework examines the
sources of wealth creation and capture by firms in an environment
characterized by rapid technological change (Teece et al., 1997).
Innovation, including new product and service development, can be
characterized as a dynamic capability (Eisenhardt and Martin, 2000).
 The Schumpeterian innovation framework considers the impact of firm
size and available resources on firm innovation (Schumpeter, 1942).
Schumpeter’s perspective views large firms as having greater capacity to
innovate due to greater market power and research and development
spending.
 The exploration-exploitation framework considers two distinctive types of
innovation. Exploratory innovations are radical innovations that are
designed to meet the needs of new markets and require new knowledge or
a departure from existing knowledge within a firm (Benner and Tushman,
2002; Benner and Tushman, 2003; Jansen et al., 2006; Levinthal and
March, 1993). Exploitative innovations are innovations that are
incremental and designed to meet the needs of existing customers or
markets (Benner and Tushman, 2002). Exploitative innovations are
characterized by refinement, implementation, and efficiency (Cheng and
van de Ven, 1996).
 The theory of S-curves explains the origins and evolution of radical
innovations (Chandy and Tellis, 2000). S-curves develop as technologies
are introduced. Little consumer benefit is realized in the introduction
phase, benefits increase as the technology develops, and benefits increase
at a slower rate as the technology enters maturity (Chandy and Tellis,
2000).
 Network theory is concerned with the nature of long-term
interorganizational relationships (Thorelli, 1986). The network theory
framework in concerned with variables such as position, power,
embeddedness, and density (Dhanaraj and Parkhe, 2006; Granovetter,
1985; Thorelli, 1986). Network theory research has considered the roles
associated with each firm in a network and the resulting impact on
innovation (Dhanaraj and Parkhe, 2006).

The current research will draw on another theory, resource-advantage theory.

According to resource-advantage theory, firms seek to use their resources to gain
a competitive advantage in the market, which will ultimately lead to superior
financial performance (Hunt and Morgan, 1996). Resource-advantage theory
states that a comparative advantage (disadvantage) in resources results in a
competitive advantage (disadvantage) in the marketplace (Hunt and Morgan,
 1996). Resources include a firm’s assets, processes, information, and knowledge
that help a firm improve efficiency and effectiveness (Barney, 1991). The
ultimate goal for firms, according to the resource-advantage theory, is superior
financial performance, which can only be attained by achieving a competitive
advantage in the marketplace. As proposed by Hunt and Morgan (1996),
innovation plays a key role in resource-advantage theory. Firms will innovate to
improve their resource position. Firms occupying positions of competitive
advantage can maintain such positions by engaging in proactive innovation to
ensure that their resources are comparatively better than the resources of
competing firms. Firms occupying positions of competitive disadvantage can
attempt to surpass advantaged firms by engaging in reactive innovation (Hunt,
2002). The following sections will examine the resources that can lead to logistics
innovation, along with the competitive outcomes of logistics innovation. Based
on a review of the existing literature on logistics innovation the current research
offers the model shown in Figure 1 to guide further understanding of the
antecedents and outcomes of logistics innovation.

3. Methodology


In order to gain a comprehensive picture of logistics innovation research, a review

of the following top logistics journals was conducted: International Journal of
Logistics Management, International Journal of Physical Distribution & Logistics
Management, Journal of Business Logistics, Transportation Journal, and
Transportation Research: Part E. These journals were specifically selected for the
review as they represent leading research in logistics. International Journal of
Logistics Management, International Journal of Physical Distribution & Logistics
Management, and Journal of Business Logistics were cited as the leading journals in
the field of logistics among leading scholars (Svensson et al., 2008). All five
journals selected for the review were

Environmental Factors
Organization of Labor (-)
Competition
Capital Scarcity
Governmental Support

Logistics Innovation Competitive Advantage

Organizational Factors
Knowledge
Technology Logistics Innovation
Relationship Network Factors
Financial Resources
Management Resources
 recently included in a call for papers issued by International Journal of Logistics
Management as leading logistics publications.

The review began with a search of each journal in the ABI/INFORM and Business Source
Elite databases. Within each database, the keyword “innovation” was searched for each
journal. The number of articles returned for each search is shown in Table I. The articles
were then reviewed to ensure that they explicitly addressed logistics innovation. This
initial identification of articles yielded research that addressed the role of logistics in new
product innovation, along with research that examined the role of various technologies in
logistics and supply chain operations. These articles were omitted from the final review as
they did not fit the scope of the review. Articles were then classified into groups based on
the contribution each one made on our understanding of logistics innovation. Constructs
from each article were reviewed and utilized to develop an integrated model of logistics
innovation. The review yielded three distinct aspects of logistics innovation research:
antecedents of logistics innovation, outcomes of logistics innovation, and the diffusion of
logistics innovation. Summaries of the articles used in the final review can be found in
Tables II-IV.

4. Literature review and proposed framework

4.1 Organizational factors

A number of studies in the logistics literature have examined organizational resources

and the impact that they have on logistics innovation. One such resource is knowledge.
The impact of knowledge on innovation has been examined within the larger scope of
innovation research using the knowledge-based view of the firm (Dhanaraj and Parkhe,
2006; Grant, 1996; Kogut and Zander, 1992; Smith et al., 2005). However, the
theoretical framework has not been explicitly used to explain logistics innovation. In
their conceptual paper on logistics and service innovation, Chapman et al. (2003) offer
knowledge as an imperative in the quest for logistics innovation. The authors state that
technology and capabilities are manifestations of knowledge and that the management of
knowledge within the organization and in interorganizational relationships is the key in
developing new ideas. Autry and Griffis (2008) also propose a positive relationship
between knowledge (supply chain knowledge development) and logistics innovation in a
recent conceptual article. Using a case study approach, Hakansson and Persson (2004)
support this notion as they found that combining resources across supply chains and the
learning associated with the combination of resources creates an environment for
innovation. Panayides and So (2005) empirically show that organizational learning,
another knowledge construct, mediates the relationship between relationship orientation
and logistics innovation. Empirical support for the relationship between knowledge and
logistics innovation is provided by Flint et al. (2008) as they show a direct positive
relationship between supply chain learning and logistics innovation.
Flint et al. (2005) used a grounded theory approach to examine logistics innovation and
what it takes to be innovative in offering logistics services to customers. Using logistics
innovation as their outcome variable, the authors offer four sets of activities associated
with being innovative. Grounded theory is the discovery of theory from data (Glaser and
Strauss, 1967). Researchers using grounded theory will often use qualitative methods for
gathering data to gain a thorough understanding of the phenomenon under review. Flint
et al. (2005) interviewed senior logistics managers in the USA, Scandinavia, and Europe
and developed a logistics innovation process model using four components.

First, “setting the stage activities” are designed to create an environment conducive to
interacting with customers and being innovative. A firm using this process for being
innovative may set the stage for customer interaction by training employees to ask
insightful questions, finding an appropriate place to meet with customer, and ensuring
that the appropriate resources are in place to capture information from its customers.
Second, “customer clue gathering activities” are aimed at getting closer to customers and
developing deeper insights about them (Flint et al., 2005). After setting the stage, a firm
may want to begin gathering information about its customers. This can be done directly,
through interviews, joint planning meetings, or customer retreats. After gathering
customer information, either directly or indirectly, a firm is often faced with the task of
using the information to improve service. However, the initial findings may not clearly
indicate what is needed from the firm. “Negotiating, clarifying, and reflecting activities”
can aid managers in reviewing messages from customers and interpreting them to define
the insights gained (Flint et al., 2005). Managers can then work together to determine the
most appropriate use of the information, including any changes or additions to current
offerings and operations. The final component, “inter-organizational learning,” refers to
the emerging knowledge that managers of logistics services gain regarding opportunities
for the development of new services, technologies, and processes (Flint et al., 2005).
Collectively, the activities identified in the Flint et al. study lend additional insight into
the process by which the appropriate knowledge necessary for innovation is obtained
and developed.

Wagner (2008) also identified a set of activities that can lead to logistics innovation. In
Wagner’s examination of the German transportation industry, he identifies internal
search and development, external search and development, investment in infrastructure
and capital goods, acquisition of knowledge, and training and education as key activities
in which logistics service providers should engage to spur innovation. The search,
knowledge acquisition, and learning activities can be grouped as knowledge resources,
which reinforces the knowledge emphasis present in earlier studies. The development
and investment activities highlight the importance of technology, which has also been
examined as an antecedent to logistics innovation.

Chapman et al. (2003) point to the role that technology has played in helping firms
address challenges associated with time and distance and the communication advances
that technology has enabled. Technology also allows for more efficient sharing of
knowledge. The pace of technology change has forced innovation in business processes
as they must adapt to new technology tools (Chapman et al., 2003). In their empirical
study on reverse logistics, Richey et al. (2005) used resource-advantage theory to
explain the importance of innovation in the area of reverse logistics. They proposed that
technological resources would have a positive impact on reverse logistics innovation.
The findings from their study were not significant; however, the sample was limited to
the automobile aftermarket industry. Further examination in other contexts is needed to
better understand the relationships.

Other antecedents to logistics innovation include various relationship factors. Hakansson

and Persson (2004) found that collaboration can lead to innovation. Chapman et al.
(2003) proposed that relationship networks can lead to logistics service innovation.
Specifically, they point to the need for firms to work together to understand the needs
and requirements of customers along with the future requirements of customers. As a
result, firms will enter into horizontal and vertical alliances with other firms to gain
access to knowledge otherwise unavailable to the firm. Gellman (1986) proposed that
the innovation from supply chain partners such as shippers and suppliers in the railroad
industry would spur innovation with the railroads. Similar to the impact that technology
can have, as previously discussed, new products or processes can create a situation in
which other members of the supply chain must innovate in order to maintain or improve
upon logistics operations with these supply chain partners.

Richey et al. (2005) also examined financial and managerial resources as antecedents to
reverse logistics innovation. These resources, combined with the technological resources
discussed earlier, were argued to be crucial resources in the development of reverse
logistics innovation capabilities. Their findings indicated that there was a significant
relationship between the deployment of managerial resources and the development of
reverse logistics capabilities. However, further examination of the relationship between
financial resources and logistics innovation is warranted as the general relationship
between financial resources and innovation performance has been supported outside of
the logistics literature (Acs and Audretsch, 1987; Chankdy et al., 2003; Cohen and
Levin, 1989).

The following propositions were developed from the preceding discussion:

P1. Knowledge resources are positively related to logistics innovation.

P2. Technology resources are positively related to logistics innovation.

P3. Relationship network resources are positively related to logistics innovation.

P4. Financial resources are positively related to logistics innovation.

 P5. Managerial resources are positively related to logistics innovation.

4.2 Environmental factors

The environment in which a firm operates can impact the firm’s ability to
innovate.
However, within the scope of logistics innovation, there has been little
examination of
environmental factors. In his research on the barriers to innovation in
the railroad
industry, Gellman (1986) pointed to federal regulation of the railroad
industry as a
significant barrier to innovative activities among the railroads. The
climate that was
created by regulation removed incentives for firms to develop or
adopt new internal processes or service offerings. The absence of competitive forces
limited the need for firms to seek innovative process or services. After deregulation, the
new business environment created a need for innovative activity by railroads as they
sought to improve cost structures and service offerings. While the federal regulation of
transportation in the USA is no longer a significant factor, the impact of government
regulation on logistics innovation should be recognized. Specifically, the impact of
government regulation on competition should be considered. Gellman (1986) also
examined the impact of labor on railroad innovation and proposed that in times when the
labor force held higher levels of power, railroad innovation suffered as the labor force
would defeat operational process innovations and equipment innovations.

Zinn (1996) presented an overview of the economic culture in Latin America,

specifically pointing to opportunities for logistics innovation. As part of his research,
Zinn (1996) argued that increasing competition among firms, along with a chronic
shortage of capital provides an incentive for logistics innovation. The inability for firms
to access capital forces them to become creative in how they use their resources, leading
them to innovate within their logistics processes and service offerings. The relationships
discussed by Gellman and Zinn have not been empirically tested and are offered as the
following propositions:

P6. Organization of labor is negatively related to logistics innovation.

P7. Competition is positively related to logistics innovation.

P8. Capital scarcity is positively related to logistics innovation.

P9. Governmental Support is positively related to logistics innovation.

Table II provides a summary of the literature from which the antecedents of logistics
innovation were derived.

4.3 Competitive advantage

Fawcett and Farris (1989) published one of the first papers in the logistics literature to
consider innovation as a predicting variable. They examined the airline industry and
found that for incumbent airlines, innovation resulted in reduced competition in the
marketplace (Fawcett and Farris, 1989). Fawcett and Farris cited the actions of the
airlines after deregulation in their efforts to erect barriers to entry, develop economies,
and impose switching costs. An example of this is the hub-and-spoke network design,
which allowed airlines to develop dense networks and reduce their cost structures
(including labor costs). This increased the entry barriers for prospective airlines with a
higher labor cost structure and limited, point-to-point service. The airlines were
successful in accomplishing these tasks, reducing the overall competition in the industry.

From an operational performance perspective, Fawcett (1991) asserted that technological

innovation and logistics capabilities were positively related to the ability of firms to
coordinate production activities. Farris II and Welch (1998) proposed that transit times
on the water could be cut in half using new vessel technology. While transportation costs
were expected to nearly double, the authors suggested that the time savings will offset
the additional cost. In their empirical study on reverse logistics innovation, Richey et al.
(2005) posited that innovation would be positively related to operational responsiveness.
They argued that innovative firms would use the technology and other resources
available to them to develop a reverse logistics program capable of handling varying
firm and customer demands. The authors also proposed that reverse logistics innovation
would have a positive impact on operational service quality. The use of technology and
customized exception handling processes was expected to lead to higher levels of
service quality. The study’s findings indicated that there is a positive relationship
between innovation and operational service quality; innovation and operational
responsiveness were not found to be significantly related.
Richey et al. (2005) also
examined the relationship between reverse logistics innovation and a firm’s
performance. In doing so, they stated that logistics innovation should improve a firm’s
market effectiveness and internal cost efficiency. They also stated that logistics
innovations can lead to increased revenues due to added services and improved customer
satisfaction. The findings indicated a positive relationship between logistics innovation
and strategic performance for large firms. Together, the findings highlighted above
indicate a positive relationship between logistics innovation and the development of a
competitive advantage. Persson (1991) argues that logistics service innovation can
provide firms with a competitive advantage. The author cites examples such as a firm’s
use of EDI to improve communications with customers, and the development of new
services to open up new customer markets and add value to existing customers.

Table III provides a summary of the literature from which the outcomes of logistics
innovation were derived. The proposition resulting from the discussion of outcomes of
logistics innovation is as follows:

P10. Logistics innovation is positively related to a firm’s competitive advantage.

4.4 Logistics innovation diffusion

As stated earlier, resource-advantage theory posits that a firm’s competitive advantage
can lead to innovation among its competitors. Alternatively, competing firms may seek
to imitate or adopt innovations in order to remain competitive in the market (Hunt,
2002). Therefore, it is important to also consider the diffusion of logistics innovations.
Much of the literature that addresses innovation in logistics is concerned with the
diffusion of innovations within and across firms. Several researchers have studied
innovation diffusion by looking at how organizational characteristics and relationships
affect diffusion. The literature in this area has adopted the viewpoint of the firms
adopting the logistics innovations, which is highlighted in the following discussion.

Diffusion of innovation is defined as the process of communicating an innovation

throughout a network (Rogers, 1995). According to this framework, innovation diffusion
consists of four main elements:

(1) Innovation;

(2) Communication channels;

(3) Time; and

(4) Social system.

An example of a logistics innovation would be containerization (as mentioned in

the
introduction). The innovation element of diffusion is concerned with the
characteristics
of the innovation. Research in logistics has identified some
characteristics of the
innovations themselves that impact diffusion to other firms. A
case study looking at incremental packaging innovations found that the complexity of
logistics innovations had a negative impact on the diffusion of innovation (Twede,
1992). In another study that examined the characteristics of the innovation, Lippert and
Forman (2006) identified technology trust and perceived long-term consequences of
technology as predictors of innovative supply chain technology adoption.

Communication channels are the means by which messages move from one individual to
another. Using the containerization example, we would want to consider how utilization
of containers moved beyond McLean’s experiment to the usage that we see today (word
of mouth, mass media, witness observation, etc.). The first containers were shipped
overseas just over 50 years ago and today containers are used for nearly all overseas
shipments of general merchandise.

The time element of innovation diffusion has also been addressed in the logistics
literature. Researchers have looked specifically at the process of innovation diffusion,
including adoption models and an innovation life cycle (Sheffi, 2004; Williams and Rao,
1998). Sheffi (2004) compared RFID with previous innovations (refrigerator,
automobile and highway system, incandescent lighting, television, and PC) to gain a
historical perspective of the innovation. In his research, Sheffi identifies stages of the
innovation life cycle and uses this as a reference to predict the future for RFID.

The social system is a set of individuals or organizations working toward a common

goal. In the containerization example, the social system of interest would be all overseas
shippers and transporters of general merchandise. Other examples of social systems
include a firm’s supply chain or departments within a firm. Together, these four
elements can help us understand how innovations spread to other people or
organizations.

Using transaction cost analysis, Stapleton and Hanna (2002) examined the impact that
logistics service innovation had on the structure of a steamship line’s social system.
Specifically, the authors examined the advent of the stack train service and the resulting
impact on the structure of the sales function. The authors argued that as competition in
the ocean shipping industry increases, it becomes increasingly important for sales
professionals to differentiate their company from competitors. Using Williamson’s
human behavior and transactional aspects of transaction cost analysis, along with
additional measures specific to the stack train, the authors developed a logistic
regression model constructed to examine a steamship line’s decision to use an internal or
third-party sales force. They found that steamship lines with higher percentages of
containers moving on stack trains (innovation) in a given market are more likely to use
an integrated sales force (Stapleton and Hanna, 2002).

Germain et al. (1994) found that organizational size is a significant predictor of

technological adoption. Larger firms were found to adopt greater levels of technologies
at all cost levels and degrees of revolutionary impact on operations (Dadzie et al., 2000;
Germain et al., 1994). Daugherty et al. (1994) proposed that larger firms may be an
excellent source of innovative ideas, and benchmarking can lead to the diffusion of good
practices throughout industry. This flows from the idea that benchmarking can provide a
firm with deeper knowledge of a practice, which is an important predictor of incremental
and radical innovation adoption (Daugherty et al., 1994). Other organizational
characteristics that impact the diffusion of innovations include innovation orientation,
warehouse size, organizational culture, communication channels, and various leadership
factors (Dadzie et al., 2000; Russell and Hoag, 2004). Williams (1994) also found that
firm size was positively related to innovation adoption and, that in the logistics channel,
power was an important factor in the adoption of EDI. The findings suggest that shippers
will exercise power over third-party logistics providers by mandating EDI adoption,
using surcharges and the potential loss of business to encourage compliance (Williams,
1994). This is in line with the findings of Crum et al. (1996), that EDI adoption is
customer-driven, with marketing benefits outweighing operational benefits of the
technology. Other research supports the notion that third-party logistics providers,
particularly smaller ones, may be slow to adopt new technology (Crum et al., 1996;
Evangelista and Sweeney, 2006). However, researchers also argue that these
organizations can play an important role in the dissemination of such innovations
(Evangelista and Sweeney, 2006).
Research has also addressed the benefits of
innovation diffusion. Sahin et al. (2007) considered the benefits in the diffusion of a
specific innovation. They developed a framework to evaluate the cost and quality
benefits of using time-temperature integrators. In another case study, Holmqvist and
Stefansson (2006) considered the use of existing mobile technologies to implement
RFID. Collaboration among actors in a supply chain and the adoption of the innovative
use of existing mobile technology can result in higher levels of reliability, usability, and
productivity. Using existing technologies can also help reduce the costs of developing
new infrastructures designed specifically for RFID.
Russell and Hoag (2004) drew
upon the diffusion of innovation framework to examine IT implementation at two
aerospace firms aimed at advancing supply chain management objectives. The authors
used the diffusion of innovation framework to examine social and organizational
influences impacting peoples’ acceptance of technological innovations designed to
improve performance. Russell and Hoag used two case studies to examine the
implementations of a customer relationship management tool and a web-based service
part ordering interface. Each implementation involved the purchase of software from a
third party. In their qualitative study of these two cases, the authors found that the
factors influencing the success of such implementations include perceptions of the
innovation, organizational culture, types of communication channels used to diffuse
knowledge of the innovation, and various leadership factors such as management level
support and breadth of support (Russell and Hoag, 2004). Table IV provides a summary
of the diffusion literature related to logistics innovation.

As mentioned earlier, the research presented on the diffusion of logistics innovations

considers diffusion from the perspective of the adopting firm. However, it is also
important to examine the diffusion of logistics innovations from the perspective of the
innovating firm. As logistics innovations provide firms with a competitive advantage,
business partners are likely to adopt these innovations and competitors are likely to
imitate successful logistics innovations (Dickson, 1992). Therefore, the following
proposition is offered:

P11. A firm’s competitive advantage is positively related to the diffusion of logistics

innovation.

(2)