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We used four sources of evidence in this research: as a secondary source of information, the analysis of documentation; and as primary sources of information, observation, questionnaires, and semistructured interviews. The use of diverse sources of evidence allows us to triangulate the data and improve the internal validity of the study (Yin, 1984).
Questionnaires and interviews were carried out with all management staff that had responsibilities or knowledge concerning the inter-organizational relationships of the firm or the use of IT in these. The validation of the questionnaire and of the script followed in the semistructured interviews made it necessary to undertake a pilot case study in another firm and to consult with a panel of experts.
The questionnaires calculated the degree of agreement (measured using a 5- point Likert scale), with various assertions relating to the propositions we proposed earlier. The transcripts of the interviews were tabulated using the technique of template analysis (King, 1998; Crabtree & Miller, 1992).
We now test the three generic propositions that we outlined above, through their derivatives, against the evidence that we collected.
Although the survey provides moderate scores with regard to the support role of IT in the implementation and control of activities, the support of IT in planning is recognized to a greater extent. However, the interviews make it clear that managers agree that IT helps them not only in planning their network activities, but also in the control of member behavior. The recognition of managers is even greater in terms of IT’s contribution when carrying out activities, specifically in receiving manufacturing orders from customers, sending designs and production specifications, sending the finished products, and subsequent invoicing and payment. In conclusion, the evidence confirms the role of IT in the planning, implementation, and control of activities of interest to strategic networks. Thus, Proposition 1.1 holds.
Proposition 1.2 also holds after observing the high scores given to IT regarding its role in storing knowledge useful to the network, as well as in providing tools for sharing knowledge useful for network activities, or identifying and contacting people on the network who possess knowledge useful for network activities.
The interviews with managers of Intec-Air demonstrate that they identify these knowledge bases in the files stored in their own system as well as those accessible by FTP in the systems of their customers. The systems allow them to graphically manipulate the products they are manufacturing, find out their specifications, and establish the processes to implement and the manufacturing sequences. The content of these knowledge bases not only includes information provided by the customers but has been extended by Intec-Air by the practical experience of processing earlier orders. This has allowed managers to adapt graphical designs in 3D to their manufacturing processes and to design their own manufacturing sequences.
In regard to the use of IT for sharing knowledge and identifying and contacting people, the company staff members mostly use technologies as basic as the telephone or fax, or at most electronic mail.
Referring to Proposition 1.3, the survey does not place much importance on the fact that the IT applied in different activities may differ. However, the interviews and observation made it clear that the type of IT was contingent on the types of activities. Thus, for example, CAD and CAM tools were used in engineering and production, respectively, while managers managed the invoicing processes using a computerized control of order receipts, electronic funds transfer, and online bank consultation. Moreover, it was recognized that IT was more useful in some activities than in others. In short, Proposition 1.3 also holds.
In the survey, the managers of Intec-Air had the opinion that IT was used more in the case of firms that were geographically distant. They also agreed that the type of IT used was not the same in function of the geographical location of the firms. However, the interviews and observation contradicted this. In contrast to the result of the survey, the diversity of IT used did not appear to bear any relation to distance between firms. For example, relations with all of the customer firms were established through some system, more or less sophisticated, for dealing with orders. Production specifications and graphic design files in standard CAD format were usually sent via e-mail and FTP; and the use of the telephone and fax was common whatever the geographical location of the firm. On the other hand, the nearest firms frequently sent staff physically to the Intec-Air factory with their orders, and problems were often resolved by personal contacts, thus reducing the intensity of IT use in these cases compared to more distant firms, according to survey results. All this partially supports Proposition 1.4, because the geographical distance is not contingent in terms of IT type, but it is in terms of the intensity of use of IT.
The moderate scoring in the survey relating to the question of whether IT was similar in type or intensity when it is used to support the information or physical component of the activities does not allow us to affirm this point, and the reverse cannot be proved. However, the interviews are clearer on this point: the managers claimed to use IT more intensively, as well as different ITs, for information purposes than for directly carrying out their manufacturing. This phenomenon is perhaps related to the system of production organized in workshops characteristic of Intec-Air. This is necessary due to the diverse nature of the production of the firm, and the subsequently small batches, a situation that does not allow for automatic production. Whatever the reason, this shows that the type and intensity of IT use depend on the information and physical component of the activities, which supports Proposition 1.5.
The managers of Intec-Air agree clearly that if the IT systems used by different firms are compatible, this improves their collaboration with the other firms. It is of note that the company is continually striving to adapt its systems to sectorial standards and to those of its customers with a view to achieving better compatibility with the systems of the firms in its network. Proposition 1.6 therefore clearly holds.
In short, the interviews with managers, along with the evidence from observation and documentation, prove that Proposition 1 holds.
In this sense, the complementary role of IT in the planning, implementation, and control of the activities within the network is clearly proved (Proposition 1.1). Equally proven is that IT fosters knowledge and learning within the network (Proposition 1.2). Moreover, it is believed that this complementarity is contingent on the types of activities shared (Proposition 1.3), on the physical or information component (Proposition 1.5), and on the compatibility between the systems of the firms in the network (Proposition 1.6). However, the belief that the type of IT used is contingent on the geographical distance of the firms (Proposition 1.4) only partially holds. In this sense, although it seems that IT is used more intensely with distance, it also seems that the type of IT used does not depend on that variable.
In the surveys, the Intec-Air managers do not agree strongly that IT improves mutual adaptation; they stress in the interviews the importance of direct contacts and personal visits in resolving problems. However, they are more convinced that IT can form routines of work and communication that support the work of inter- organizational lateral relations, thereby improving coordination in the network. This means that Proposition 2.1 partially holds.
The survey accepted that IT helps in the planning of shared or interrelated activities in the network, as well as that the planning was useful in reducing any unexpected behavior by network members. Thus, the role of IT in the planning and the role of planning in the coordination of the total network behavior are shown. In this sense, the interviews agreed that the information provided by IT allows managers to plan their behaviors in advance with a view to coordinating their compliance with their roles within the network structure. Thus, Proposition 2.2 holds.
Although in the survey managers scored moderately the support that IT gives to the control of the operation by network members, in the interviews, it was clearly shown that this support is significant. Managers commented that the installation of IT equipment, standard as well as specific, allowed their main customers to observe the development of their orders and to find out at what stage of manufacture their orders were. It was also noted that IT allows managers to estimate the probability of hitting delivery deadlines by allowing access to the warehouses of other firms, helps to check that customers have received their orders properly and if they have been invoiced, and facilitates error detection in the invoicing process. This leads us to support Proposition 2.3.
The managers of Intec-Air surveyed confirmed that IT supported inter-organizational routines, and that it even formed part of them. This was corroborated in the interviews, in which managers detailed how IT formed part of routines in dealing with orders, sending orders and manufacturing specifications, and announcing delivery of the finished batches. Thus, Proposition 2.4 holds.
Proposition 2 attempts to prove that IT reduces the coordination costs of the firms in networks. This has been proved by the support IT provides to the lateral relations (Proposition 2.1), planning (Proposition 2.2), control (Proposition 2.3), and inter-organizational routines (Proposition 2.4). But we cannot prove that IT facilitates mutual adaptation (Proposition 2.1), a means of coordination that seems to be limited to informal personal contacts. Despite this, the evidence is sufficient to support Proposition 2.
The survey does not support the view that standard IT is preferable to specific (made-to-measure) IT in forging new relations, or that standard IT is growing in contrast to specific IT. The view that once a firm possesses standard IT that working with other firms will be encouraged is only partially held.
Managers made it clear in the interviews that they preferred to use standard IT in their relations. However, this desire, and the reduction in transaction risks arising from standard IT use, do not appear to provide a sufficient condition to establish new relations or to reject relations that require specific IT, without considering first how valuable the relationship is.
Furthermore, in the interviews, it became clear that the large variety of standards (for EDI applications, systems of production management, CAD applications, etc.), with none being particularly predominant, makes it equally necessary to invest in new IT for each new relation. This IT will often not be of use for the subsequent relation. Thus, investment in standard IT may also increase transaction risks for the simple reason that it is expensive. This evidence clearly means that Proposition 3.1 does not hold.
With regard to Proposition 3.2, the responses to the survey do not appear to prove that specific investment increases transaction risk and thereby discourages a firm from joining a network. The interviews also provided evidence in the same line. Managers argued that they assessed any investment in specific IT in function of the value provided by the new relation. It did not matter whether the IT was standard or specific, but that the investment was necessary to be able to compete. In short, Proposition 3.2 does not hold.
The evidence allows us to support Proposition 3.3. Although the survey scored poorly the ability of IT to supervise the behavior of the other firms, the interviews made it clear that IT facilitates such control. In this way, IT leads to a reduction in transaction risks that derive from information asymmetries. Managers stressed that IT allowed them to check that goods had been received by the customers, that these were paid, and whether there had been any mistake in the invoice.
The evidence concerning the influence of IT in the loss of control of resources (Proposition 3.4) is contradictory. Managers recognized in the survey that IT makes it easier for business practice and knowledge to leak, thereby increasing the risk that the information ceded is misused. Nevertheless, the interviews point in another direction. Although managers did not deny that IT facilitates the loss of control of resources, they argued that the risk did not increase transaction risks because of contractual safeguards, which are common and sufficient to dissuade other firms from opportunistic behaviors. Therefore, Proposition 3.4 does not hold. This is positive for the generic Proposition 3 in terms of the reduction, and not increase, in transaction risks.
The propositions we analyzed lead us to partially support Proposition 3. Specifically, we observe that the potential reduction in transaction risks that may arise from investment in standard IT (Proposition 3.1), or the increase in the case of investment in specific IT (Proposition 3.2), are not determinant in the participation of the firm in the relation. It is more important for the firm to forge valuable, new relations whatever the IT required. In terms of the ability of IT to reduce information asymmetries (Proposition 3.3), the balance is more positive, thereby leading to a reduction in the transaction costs. Moreover, the threat that IT increases these risks by facilitating the loss of control of information resources (Proposition 3.4) is limited by contractual safeguards. In short, we can conclude that IT reduces transaction risks through its role in information asymmetries and that it does not particularly influence in the case of specific investment or threat of loss of control of resources.
Throughout our analysis of the propositions in the case we presented, diverse variables that were not initially considered came to the fore and proved to be catalysts of value creation (Proposition 1) and coordination costs (Proposition 2), or moderators of transaction risk (Proposition 3). These variables were related to long-term relations, the importance of reputation, investment among members of the network, contracts, the value of the relation, and the firm’s position in the network.
With regard to the establishment of long-term relations, it became clear that the complementarity of IT when it supports inter-organizational relations is greater when these relations are stable. When the relations are long lasting, information systems are established that allow the firms to concentrate on the activities central to the relation and not worry about the details of the communication process. Equally, the role of IT in improving coordination costs is more important in long-term relations, because the development of mutual understanding takes a long time. Finally, long-term relations influence the third generic proposition. Here we observed the reduction in transaction risks (incurred when a firm invests in specific IT or by the threat of losing control of information resources), when it was certain that the relation being forged would be long term—a relation in which trust is developed, which will continue into the future, and which is valuable and worth investing in. When the relation with other firms was only to be temporary, the firm did not make costly investments in transaction-specific IT, resorting to more rudimentary technologies or using the services of subcontracted technologies.
The managers of Intec-Air also highlighted that the good reputation of the firm with which a relation is desired favors the investment in specific IT without increasing transaction risks (or at least the managers’ perception of the probability of opportunistic behavior). On the other hand, operations were frequently rejected because of the poor reputation of the other firm (in terms of compliance with deadlines, planning capability, confidence that it would complete the project, etc.). Managers also mentioned firms that express interest in products simply to find out what the costs will be and how the company works. The response to this interest is not as open as it is to firms that have solid reputations.
With regard to investment among network members, the managers believed that trust increases, thereby reducing transaction risks, if the other firms invest in specific IT in order to work with Intec-Air, or if these firms finance transaction- specific IT investment in these technologies in Intec-Air installations.
We expected that the ability to transfer information easily and quickly, and occasionally anonymously, would increase the probability of a loss of control of information sensitive to the firm, thereby increasing transaction risks (see Clemons & Row, 1992). However, the case we studied shows that although managers are aware of this risk, there are contractual and legal safeguards thought to be sufficient to dispel it. Thus, another variable appeared that catalyzed transaction risk: contracts.
As we observed earlier in our analysis of Proposition 3.2, investment in specific IT, that in theory would increase transaction risks, was, in fact, encouraged by the opportunity to forge a valuable relation with other firms. The value of the relation is, therefore, another factor that is a catalyst of transaction risk. This does not mean that managers do not recognize that standard IT would allow them to relate to other firms more easily and in greater number. But although desirable in that respect, whether the IT was standard or specific was secondary in decision making on IT investment.
Finally, a position of power within the strategic network was also a determinant in the transaction risk of IT investment. This position allows a firm to promote standard IT (or specific IT that it already possesses) within its network, in order to avoid transaction risks.
In short, although we expected that investment in transaction-specific IT and the threat of a loss of control of resources would increase transaction risks, the evidence is against this. The paradox thrown up in the development of Proposition 3 has not therefore been fulfilled. This analysis permits us to conclude that IT reduces transaction risks, and that Proposition 3 holds when these moderating variables are present.
The firm that took part in the pilot case study belongs to the sector manufacturing high-precision electronic components for cars.
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