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It And E-channel Performance In Small Retailers: The Mediation Mechanism Of Resource Complementarities
Sep 15, 2023 | Tenzin Norzin
The e-service economy has been growing and small firms are using e-channels such as websites to expand their target market and increase revenue. However, small firms often have limited resources, which hinders their ability to fully benefit from e-channels. This study examines the relationship between information technology and e-channel performance in small local retailers. Information technology is seen as an important resource for firms utilizing e-channels, but there is a lack of survey-based studies on small firms' IT use and its impact on performance. The "productivity paradox" refers to the inconsistent results of research on IT's effect on firm performance. Studies have shown that IT alone is not enough to improve performance, but rather the ability of the organization to effectively use IT is crucial. The complementary resources and skills needed to effectively use IT have a stronger impact on performance than IT alone. It helps retailers improve efficiency in service designs and supply chains, which in turn drives performance improvements.
This study explores how IT contributes to the profitability of small Internet retailers. It extends previous findings that suggest there are mechanisms by which IT can enhance performance. The study focuses on the concept of resource complementarities and identifies six mechanisms, with covariation being the most prevalent in previous studies on IT and firm performance. However, the study also finds that the effect of IT on performance is indirect, suggesting the presence of a mediator. The study aims to identify this mediator and propose a model for small Internet retailers.
The study aims to investigate the relationship between IT resources and firm performance in the context of small local retailers. The researchers propose a mediation model to explain how the use of IT resources can positively impact firm performance through resource complementarities. The study differentiates itself from previous studies by using a mediation mechanism that considers causality among resources. The researchers also refined the mediation model by incorporating both exploitative and explorative use of IT. The study contributes to the understanding of resource complementarities in the retail sector and the challenges faced by local retailers in adopting e-channels.
Previous studies have examined the exploitative and explorative uses of IT and resource complementarities, which are aligned with the resource-based view. This paper proposes a mediation model to further explore the relationship between resources and performance. Data was collected and validated, and structural equation modeling was used to test the hypotheses. The results provide theoretical and managerial implications for the understanding of resource complementarity.
It is an important asset for Internet retailers, but its direct impact on performance is not clear. Previous studies suggest that retailers must use IT as part of a larger resource bundle to gain a competitive advantage. This bundle should include resources that complement IT and enhance its effectiveness. A study by Sanders (2008) distinguishes between exploitative IT, which improves operational efficiency, and explorative IT, which supports strategic coordination. To achieve significant business performance, retailers need a resource bundle that supports both types of IT use.
The exploitative use of IT involves using technology to improve efficiency and reduce costs in existing business processes. The explorative use of IT focuses on using technology to gather data and improve business intelligence for future practices. Both of these uses are important for businesses. An example of exploitative IT is enterprise resource planning, which helps with inventory and delivery. The recent demand for business analytics shows the need for explorative IT to detect changes in the market and respond quickly.
The use of IT in supply chain management allows for information sharing and collaboration among members of the supply chain. When there is a common vision between the firm and its suppliers, timely and effective information sharing supports decision-making and reduces production and delivery lead times. It also enables coordination of production planning and improves effectiveness and efficiency in areas such as purchase, delivery, and inventory. This increased information integration and collaboration leads to higher process speed and ultimately, increased firm performance.
Theoretical development
This study examines resource complementarities for Internet retailing by focusing on three essential resources: e-IT competence, e-service agility, and e-market acuity. E-IT competence refers to a retailer's ability to understand and use IT tools and processes for online operations. E-service agility is the ability to rapidly respond to operational situations when delivering online services. E-market acuity is the ability to see the competitive market environment, including online customers' needs and preferences. It plays a crucial role in enhancing these resources and improving performance in Internet retailing.
The Internet has shifted management focus from goods to services. Internet-based businesses, such as online retailing, require different resources to be customer-centric. These resources include organizational culture, structure, business processes, and financial metrics. By utilizing these resources, Internet retailers can effectively relate to their customers, leading to customer satisfaction, loyalty, and increased profitability.
The direct effect of e-IT Competence
The first hypothesis of the study suggests that e-IT competence has a direct effect on perceived market performance. Previous research has shown that IT competence positively affects performance. Case-based studies have provided evidence that small businesses' success in adopting and utilizing e-channels depends on their e-IT competence. For example, a small Spanish wine retailer faced technical problems when trying to link their website to their inventory database due to a lack of IT skills, causing them to abandon the project. In contrast, another case study observed that a family-owned small retailer achieved success by continuously updating their website and acquiring new IT skills.
A study by Pflughoeft et al. (2003) shows that small US firms that have e-IT competence use the Internet more and gain both strategic and operational benefits from it. The strategic benefits they gain include expanding their geographical market, increasing sales, and gaining a diverse customer base. The operational benefits they gain include increased productivity and faster business operations. By having e-IT competence, retailers can provide high-quality services online, engage their customers, and create customer satisfaction, trust, and loyalty, which leads to an increased customer base and improved market performance.
Methodology
The survey instrument for this study was developed through a literature review of previous research on IT competence, service agility, and market acuity, focusing on non-e-service retail businesses. As the study is conducted in the e-service context, the conceptual domains and operational scales needed to be adapted. Market acuity has been previously measured using multiple items in retail banking, while IT competence or capability has been measured using different scales in the manufacturing, life, health insurance, and retail sectors. The concept of agility has been used in the manufacturing and supply chain sectors.
Construct validity of the scales used in the study was assessed through unidimensionality, convergent validity, and discriminant validity. Confirmatory factor analysis showed that the measurement model had satisfactory fit statistics, indicating good construct validity. All factor loadings were highly significant, supporting the validity of the items in measuring their respective constructs. The correlation table also showed higher correlations among items within the same constructs, further supporting the validity of the scales. Finally, a more stringent test of discriminant validity was performed, comparing the original model with a nested model, and the differences in Chi-square were all significant, demonstrating good discriminant validity.
Conclusions
The hypothesis tests conducted using Structural Equation Modeling (SEM) included two control variables, organizational size, and e-experience. The results showed that the direct effect of e-IT competence on perceived market performance was not statistically significant, which does not support the hypothesis. This suggests that florists with higher e-IT competence do not necessarily have a higher market performance from their e-channels. However, there was a significant relationship between e-IT competence and e-service agility, indicating that florists with higher e-IT competence are more agile in their e-service delivery.
This study examines the impact of e-IT competence on e-channel performance for small e-service firms. The results show that e-IT competence has a positive effect on both e-service agility and e-market acuity. E-service agility and e-market acuity also have positive effects on perceived market performance. Perceived market performance, in turn, has a positive effect on actual profit from e-channels. The findings suggest that e-IT competence is an important resource for small e-service firms to improve efficiency and gain market understanding, ultimately leading to increased profit.
The results of the study may not be a sufficient validation of the mediation mechanism. The authors argue that the positive effect of e-IT competence on perceived market performance may not hold regardless of the mediators. To confirm the true mediation mechanism, the direct effect of e-IT competence in the absence of mediators is analyzed. The results show a statistically significant relationship between e-IT competence and perceived market performance in the absence of mediators. However, this significance is eliminated in the presence of mediators, suggesting that the mediation model explains a greater amount of variance.
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