A review of research illustrating the impacts of ...



A review of research illustrating the impacts of digitization on the buyer-seller relationships

Jari, T, Salo*

Doctoral student in marketing

Faculty of Economics and Business Administration, University of Oulu,

P.O. Box 4600, FIN-90014 Oulu, Finland

E-mail: jari.salo@oulu.fi

Kimmo, J, Alajoutsijärvi

Professor

Faculty of Economics and Business Administration, University of Oulu,

P.O. Box 4600, FIN-90014 Oulu, Finland

E-mail: kimmo.alajoutsijarvi@oulu.fi

Timo, K, Koivumäki

Professor

Faculty of Economics and Business Administration, University of Oulu,

P.O. Box 4600, FIN-90014 Oulu, Finland

E-mail: timo.koivumaki@oulu.fi

*Please address correspondence to the first author

Abstract

From the 1970s onwards the number of publications discussing business relationship, buyer-seller relationships, and inter-organizational relationships has mushroomed. New emerging trend in these studies is the focus on technology usage to create value. Despite the fact that there has been a lot of research illustrating the impacts of digitization on buyer-seller relationships the field is still highly inconsistent and fragmented. Too often, studies start their introduction by stating that there is no research whatsoever in this area or acknowledge only a few of them. Inspired by this ambiguity, the purpose of this article is to compile an assessment of the state of the field of the impacts of digitization on buyer-seller relationships. First, literature reviews were conducted using multiple databases. Second, literature was analyzed accordingly and basis of that a classification was formed. As a review of studies, this paper attempts to provide a consistent description of the phenomenon as well as tries to create a solid foundation from which rigorous further studies can be launched. A classification of the previous studies describing the affects of digitization on business relationships is based on process and structure dimension of business relationships. This classification identifies current study areas as well as pinpoints gaps that are more or less under researched. Thus, this paper attempts to unify ideas and isolate further research voids for academics as well as managers when trying to understand the digitized logic of future buyer-seller relationships. The paper concludes with a description of the limitations of the study and suggests avenues for future research.

Keywords: Buyer-seller relationships, digitization and information technology, literature review

Introduction

The digitization phenomenon has regularly been written up in the popular as well as academic press (Sawhney 1999; Holland and Naudé 2004). The issue of digitization is important for both academics and managers as digitization has affected both theory and practice. The term digitization is employed in many studies but left undefined (see e.g. Ordanini and Pol 2001). However, in this article the term digitization broadly encompasses the computerization, information technology, and e-business, as well as e-commerce employment while communicating and transacting between business parties. It should be noted that the term digitization is used here in a broad meaning and it includes more facets than the internet-based commerce and communication currently discussed (Boyd and Spekman 2004). There is a growing interest to address this highly inconsistent and fragmented as well as expanding body of literature (Holland and Naudé 2004; Reid and Plank 2000). However, to illustrate, digitization literature has been addressing other governance mechanisms (Williamson 1975) than business relationships (see e.g. Grewal et al. 2001). Here the focus is on the business relationships i.e. inter-organizational relationships (Ritter and Gemünden 2003; Wilkinson 2001). The terms business relationships, buyer-seller relationships, and inter-organizational relationships are interchangeable. Before examining the literature that specifically deals with business relationship, we place this topic in the context of closely related research. Researchers have touched on business relationships from a many viewpoints including transaction cost theory (Coase 1937; Williamson 1975), relationship marketing (Berry 1984; Grönroos 1994), political economy view (Benson 1975) as well as from IMP (Industrial Marketing and Purchasing) perspective (Håkansson 1982; Turnbull et al. 1996). All of these theories have been employed to shed light on the business relationships. Furthermore, above mentioned research streams are theoretically diverse perspectives for studying the impacts of digitization on the business relationships and thus the contributions are scattered around different journals. As a result of this diversity a unifying view on this topic is missing and this paper attempts to provide pertinent steps toward building a more lucid view. In short, as Lichtenthal (2000) suggests in-depth literature reviews provide consolidation and subsequent expansion of a field. Thus we attempt to provide partial unification to the heterogeneous field of business relationship digitization. More specifically we attempt to address following question how current literature describes the affects of digitization on business relationships? The authors attempt to provide answer to this question as follows. In the next section, we identify the foundation of the digitization literature as part of the computerization discussion that has been evolving from the 1960s onwards. We then provide a literature review illustrating the research on the business relationship digitization. We conclude by discussing the theoretical and empirical contributions of our study and identify future research extensions.

The origins of the digitization literature: from 1960s until today

From the 1960s onwards, the computerization of business activities has been an area that has been widely studied (Kaufman 1966). The various research streams have been focusing on both the organizational usage of information technology (Wijnhove and Wassenaar 1990) as well as on the productivity and information technology uptake (Brynjolfsson and Hitt 1998). Much of the studies conducted in the 1960s and 1970s did not acknowledge the role of inter-organizational information systems (IOS) as drivers of change in an electronic age. IOS is “an automated information system shared by two or more companies” (Cash and Konsynski, 1985) which is seen as central building block when digitizing business relationships. IOS encompasses hardware, network facilities, software, procedures and norms relating to databases as well as knowledge exchange between partners (Barrett and Konsynski, 1982). From the late 1970s to the middle of the 1980s interest was sparked to study the impacts of computerization on the buying and selling to the computer assisted buyers (Mathews et al. 1974; Mathews et al. 1977) and the impacts to inter-organizational relationships (Backhaus, 1986; Barrett and Konsynski 1982; Buzzell 1985). These studies described how technology change will impact on communication, exchanging, and the way a business is organized. Most of these studies pinpointed the importance to study the change brought by technology and were conceptual in nature. Moreover, only a few of them supported their conceptual findings with solid empirical proof (see e.g. Mohr 1990; Stern and Kaufmann 1985). In the 1980s most of the studies focused on the role of IOS and more specially examined Electronic Data Interchange (EDI) (Barrett and Konsynski 1982; Cash and Konsynski 1985; Stern and Kaufmann 1985). Definitions for EDI, its role, and benefits were discussed in multiple forums (see e.g. Emmelhainz 1990; Riggins and Mukhopadhyay 1994; Stern and Kaufmann 1985). EDI literature mushroomed into hundreds of publications evolving in the area and from the middle of the 1990s the EDI was tackled from multiple viewpoints (Hausman and Stock 2003; Naudé et al. 2000; Vlosky et al. 1994; Vlosky et al. 1997; Wilson and Vlosky 1998). Furthermore, as the decade progressed the research focus shifted from EDI to the internet and web-based systems (Clemons et al. 1993; Vlosky et al. 2000). Still, in the new millennium, as Reid and Plank (2000) with their massive literature review suggest, the alignment of computerization and marketing remains unstudied. A similar point regarding internet usage in the business relationship were acknowledged by Stump and Sriram (1997) and Möller and Halinen (1999). Today extant academic literature on the impacts of digitization on business relationships concentrates primarily on two relatively broad areas. The first examines the use of networking technologies such as the internet, intranet, and extranet (Bello et al. 2002; Boyd and Spekman 2004). This research stream looks at the role of networking technologies in the creation of value and their role in different types of marketplaces (Iyer 2004; Jap and Mohr 2002). Electronic marketplaces are not in the focus of this article, however, it is briefly noted that there are already known problems in revenue and value creation mechanisms (see e.g. Jap and Mohr 2002). The second stream examines the factors related to the adoption, implementation, and usage of the internet and other networking systems (Hausman and Stock 2003; Naudé et al. 2000; Ryssel et al. 2004; Vlosky et al. 2000). It can be summarized that both managerial and academic focus has shifted from the coordination of the internal functions and separate tasks to a more holistic and integrated view on multiple and interlinked processes like new product development, knowledge sharing, and cooperation.

The impacts of digitization on the business relationships

In the literature reviews we identified altogether 26 studies that are pertinent for gaining new insights as well as those are illustrating diverse impacts of digitization on the business relationships. It should be noted that there are a lot of studies that are rather similar to these studies, however those are not taken into analysis due to the fact that space is limited, findings are rather similar, and there exists methodological or conceptual incoherencies. We have categorized studies firstly into two broad classes depending on their research orientation empirically grounded or theoretical-analytical research. Similar type of classification has been employed previously (see e.g. Kerin et al. 1992). After that we identified the focused technology aspect as well as sought to understand if the authors where interested in illuminating the structural issues of a business relationship or the processual aspects of a business relationship (see e.g. Håkansson and Snehota 1995). Table 1 presents identified studies that have elaborated on the impacts of digitization on the business relationships.

Table 1 Studies focusing on the impacts of the digitization on the business relationships

|Authors |Sample/ Technology |Focus: Structure/ |Major findings |

| |focus |Process | |

|Empirically grounded |

|Stern and |Personal interviews.|Both are discussed. Describes changes |Shows the role and impacts of the EDI. Illustrated some of |

|Kaufmann (1985)|16 companies with |in structure of communication and |the benefits of the EDI adoption and discussed the nature of |

| |EDI. |coordination. Highlights EDI adaptation|power in the buyer-seller relationships. |

| | |process and pinpoints to performance | |

| | |benefits gained using EDI. | |

|Mohr (1990) |125 members of |Mainly describes communication and |Increased computerized communication (E-mail) is associated |

| |marketing channel of|coordination process and how E-mail |with higher levels of participation, coordination, and |

| |computers. E-mail. |affects it. |commitment. Also timeliness of communication is increased. |

|Vlosky et al. |173 home center |Both are discussed. Illustrates |Implementation of EDI is usually buyer initiated. The |

|(1994) |retailers and 154 |performance outcomes of EDI adoption |implementation phase is crucial. Key factors for successful |

| |distributor |and highlights the role of adaptations |adoption are communication, coordination, and planning. |

| |intermediaries. EDI.|especially from seller’s side. | |

|Vlosky et al. |22 home center |Both are discussed. Structure of |Relationship Satisfaction Gap concept was created. |

|(1997) |buyers and 102 wood |relationship and parties give rise to |Perceptions of the both parties’ impact on the degree of |

| |products suppliers. |satisfaction gap. Gap is narrowed by |disconnection between parties. Disruption is high if |

| |EDI and UPC. |communication and coordination as well |disconnection is wide but evidently after adoption |

| | |as with adaptation (e.g. financial |relationship strength and satisfaction increases. |

| | |investments, learning) processes. | |

|Wilson and |13 home center |Change process is discussed. |The IOS implementation disrupts the relationships when buyers|

|Vlosky (1998) |retailers and 22 |Implementation process is exercise of |are pushing sellers to adopt technology. Buyers are gaining |

| |channel members. EDI|power. |more than seller and authors suspect that in the future the |

| |and UPC. | |benefit levels will rise. |

|Naudé et al. |89 large UK firms. |Both are discussed. EDI impacts on |Identifies various EDI benefits both in financial, strategic |

|(2000) |EDI. |structure since adaptations have to |and behavioral level. EDI partners are locked to a |

| | |make when aligning EDI. Coordination |relationship. |

| | |and communication occur more naturally.| |

|Vlosky et al. |56 companies from |Both are discussed. Technology brings |Defines the benefits of using extranet. Largest advantage is |

|(2000) |different industries|in new facet to structure. |increased purchases/sales through electronic linkages. It |

| |engaged in the |Communication and exchange between |also simplifies and reduces costs. The extranet partners are |

| |extranet usage. |parties is affected by extranet. |perceived more positively than non-extranet ones. |

| | |Organizational benefits are discussed. | |

|Carr and |175 mail surveys and|Focuses on communication process. |Notices the scant literature on the IT affect on |

|Smeltzer (2002)|36 interviews with |Discusses IT usage and its relation to |buyer-supplier relationships. Trust is not increased by the |

| |purchasing managers.|information richness and frequency. |IT, however the IT is applicable in frequent communication |

| |Several | |between partners. |

| |technologies. | | |

|Leek et al. |107 procurement |Focuses on process of communication. |Describes the impact of the IT on various elements of the |

|(2003) |managers. Several | |business relationship. Impersonal IT-based communication may |

| |technologies. | |become cornerstone of many new relationships. Range and depth|

| | | |of information exchange increases. The amount of face-to-face|

| | | |communication will decrease. |

|Hausman and |Two large surveys |Focuses on process adaptation and noted|The factors affecting adoption and implementation seem to be |

|Stock (2003) |with hospital |the importance of social interaction. |different. Social influence plays a crucial role in the |

| |managers. EDI. | |cooperative adoption of technologies like the case of the |

| | | |EDI. |

|Rao et al. |10 interviews with |Focuses on communication and business |The use of the internet impacts little on trust and does not |

|(2003) |service companies. |performance increase. |hinder personal forms of communication. Internet use is |

| |Internet. | |associated with improved business performance and |

| | | |satisfaction. Social bonds have to be created before |

| | | |technical bonds. |

|Deeter-Schmelz |138 purchasing |Focuses on communication and the role |The internet plays a moderate role in the business |

|and Kennedy |professionals |of information. |relationships and if the information exchange and trust are |

|(2004) |interviewed. | |in high level the role is even lesser. |

| |Internet. | | |

|MacDonald and |102 industrial |Focuses on the adaptation and usage of |Technology-mediated communication control costs while keeps |

|Smith (2004) |companies. Multiple.|systems. |personal touch. It also has positive effect on the trust and |

| | | |future purchase intentions. |

|Ryssel et al. |61 companies. |Both are discussed. Structure of |IT deployment has diverse impacts on the atmosphere and value|

|(2004) |Several |organization affects IT deployment. |creation within the business relationship. Internal IT |

| |technologies. |Value creation process is enhanced. |systems determine IT deployment within relationship. |

|Authors |Technology focus |Focus: Structure/ |Major findings |

| | |Process | |

|Theoretical-Analytical perspectives |

|Han and Wilson |Several |Stresses the role of structure. |Technology employed by a supplier and a customer leads to |

|(1989) |technologies. | |different organizational structures, behaviors, and the |

| | | |structure gives rise to different types of interactions. |

|Clemons et al. |Information |Discusses the process of coordination |The IT investments will be made with long-term suppliers |

|(1993) |technology in |and how IT lowers transaction risk |because it takes time to recoup the investments and to learn.|

| |general. |associated with it. |Human interaction needs to be managed since systems |

| | | |themselves do not create trust. |

|Bensaou and |Information |Both are discussed. Information |Illustrates the role of IT-mediated interorganizational |

|Venkatraman |technology in |processing is discussed and respective |relationships. Develops a model to explain |

|(1996) |general. |capabilities are introduced. |inter-organizational coordination. Identifies IT facilitated |

| | | |and supported information processing capabilities as new |

| | | |sources of organizational capabilities. |

|Kumar and |IOS. |Stresses the role of conflict |Discusses collaboration and conflict management within |

|Dissel (1996) | |management as a processual |interorganizational systems. Structurability of the |

| | |characteristic. Different IOS types |relationship influences the degree of programmability of |

| | |cause different conflicts. |relationship. |

|Han (1997) |Several |Stresses the role of structure. |Almost identical to Han and Wilson (1989), however more |

| |technologies. | |emphasis on the technological matching i.e. if both parties |

| | | |have similar technologies it is beneficial for relationship. |

|Bello et al. |E-tools. |Both are discussed. Adaptations are |Shows how software is linked to channel activities and how |

|(2002) | |needed to use e-tools. Totally six |communication and transaction enhancements are possible. |

| | |different activities are identified and| |

| | |e-tools are matched for each activity | |

| | |as well as well as possible performance| |

| | |outcomes are discussed. | |

|Jap and Mohr |Web-technology. |Both are discussed. Different types of |“B2B technologies… may undermine long-term business |

|(2002) | |relationships from relational to |relationships”. Provides an overview on the fit between |

| | |transactional require different types |relationship orientation and employed web-technology. |

| | |of web-enabled technologies |Technology can free up scarce human resources to do more |

| | | |value-added activities. |

|Schurr et al. |Web-technology. |Discusses the role of communication and|Describes information quality in the web-based information |

|(2002) | |information quality in business |systems. Identifies characteristics of information systems to|

| | |relationship context. |moderate the influence of information quality on the business|

| | | |relationships. Suggests future studies on the impact of |

| | | |information quality on trust. |

|Osmonbekow et |E-tools. |Both are discussed. Adaptations are |Illustrates how adoption of the e-tools impacts on both the |

|al. (2002) | |needed to use e-tools. Discusses the |structure and processes of the buying center. |

| | |changes brought by E-commerce to | |

| | |procurement and how both transactional | |

| | |and communicational tools exist. | |

|Easton and |IOS and virtual |Mainly discusses structural issues on a|Authors raise a question is more communication necessarily |

|Araujo (2003) |markets. |macro level. |better for the relationships. They suggest that it even may |

| | | |lead to reduced levels of trust. |

|Boyd and |Internet. |Discusses value creation process and |Impact of the internet requires aligning its attributes with |

|Spekman (2004) | |how the internet impacts on it. |the economic and relational factors driving value creation. |

| | | |Internet supports digital resource sharing. |

|Iyer (2004) |Internet, intranet, |Discusses structures and purposes of |Company and offering characteristics affect on choices made |

| |and extranet. |electronic marketplaces and identifies |regarding adoption of particular type of IT. |

| | |private exchanges and extranets as | |

| | |suitable form for business | |

| | |relationships. | |

Table 1 classified identified studies according to their perspectives, technology focus, sample size, structure or process focus, and major findings. First, empirically grounded studies are discussed and then theoretical-analytical studies are elaborated.

Empirically grounded studies

Stern and Kaufmann (1985) suggest that close relationships get closer as two organizations confirm the relationship by establishing linkages such as EDI. Mohr (1990) focused on one computerized communication form, namely E-mail. She pointed out that when E-mail was used for communication the timeliness of communication increased, however she also noticed that the uncertainty of the market environment does not affect E-mail usage. It is highlighted that the role of E-mail usage has evidently changed as it is currently more common form of communication. There is also evidence, acknowledged by Vlosky et al. (1994), that the IOS or EDI implementation process has to be carefully planned and it is usually buyer initiated. This is similar to an earlier point made by Han and Wilson (1989). Vlosky et al. (1997) continue with business relationship and EDI aspects as they further stress the fact that the perceptions of the both parties impact on the degree of technology disconnection between parties. Disruption is high if disconnection is wide but evidently after adoption relationship strength and satisfaction increases. Wilson and Vlosky (1998) advance their idea that buyers are gaining more out of information technology systems but they also suggest that in the future benefits levels will rise. This is noticeable since these systems provide tangible (e.g. cost reductions) and intangible (e.g. increasing information technology skills) benefits to parties. Naudé et al. (2000) identified both economic and control elements of EDI benefits and argued strongly that real benefits exist. Vlosky et al. (2000) describes the benefits of using extranet and illustrate that partners with extranet are perceived more positively than laggards. This is evident, since for example, the cost of service is lower and information is available constantly to ease coordination and transacting. In their studies Ryssel et al. (2004) notice that information technology deployment has diverse impacts on the atmosphere of a business relationship. The power–dependence, cooperation and conflict, and overall closeness or distance of relationship might be all altered after uptake of mission critical digital tools. The change within relationship depends on the digital tools and their nature i.e. one-way or two-way tools. One interesting finding is that internal systems determine the deployment within a relationship. This result is similar to Stern and Kaufmann’s (1985) EDI finding but on a more holistic level. Deeter-Schmelz and Kennedy (2004) has a more passive view as they suggest that the Internet plays a moderate role in business relationships and if information exchange and trust are in high level the role is even lesser. These results must be viewed critically as only one-sided data is used by Deeter-Schmelz and Kennedy (2004) and that is generalized to a business relationship that consists of two parties. Despite the fact that there are studies that include multiple technologies i.e. EDI and E-mail (Carr and Smeltzer 2002; Leek et al. 2003; Schurr et al. 2002) in their conceptual analysis it is acknowledged that more research needs to focus on highlighting the affects of digitization on business relationships by employing dyadic data sets and multiple technologies since business relationships are composed of those elements.

Theoretical-analytical

Han and Wilson (1989) describe the impact of technology on supplier-customer relationships. Technologies used to illustrate the point are JIT, CAD, and computer-aided engineering (CAE). They highlight that the technology match i.e. compatibility, is a vital aspect of relationships and that if mismatch occurs adaptations should be made in order to carry on the relationship effectively. Han (1997) points up similar insights in her modified paper. Clemons et al. (1993) describe using the transaction cost approach how the cost structure is altered after uptake of information technology and highlight the importance of having long-term business relationships since technology investments take time to mature. Additionally, they pinpoint that information systems do not create trust per se but trust has to be created over a period of time in social encounters. It is further emphasized here that trust is an interpersonal concept while commitment is an organizational level concept. The point of trust by Clemons et al. (1993) is expanded by Rao et al. (2003) as well as MacDonald and Smith (2004). Bensaou and Venkatraman (1996) identify two types of electronic linkages. These are asymmetric access and symmetric integrated platform. It seems that EDI is one type of asymmetric access and symmetric integrated platform could be the Extranet or comparable solution. A symmetric platform seems to provide the possibility to change a deeper set of information. This work is later supported by (Schurr et al. 2003). Kumar and Dissel (1996) discuss conflict management within inter-organizational relationships and information systems. The result of this research is that the degree of programmability of relationship varies case by case and this influences conflicts (see Stern and Kaufmann 1985). Jap and Mohr (2002) provide insights similar to many others as they point to the undermining factor and fit between technologies. Also the benefit of freeing scarce human resources mentioned by Jap and Mohr (2002) is discussed previously in different contexts (see e.g. Mathews et al. 1977; Stern and Kaufmann 1985). Schurr et al. (2002) illustrate how information quality has an influence on a business relationship i.e. the right medium and technology must be employed to facilitate the right processes. A similar argument was proposed by Stern and Kaufmann (1985). Bello et al. (2002) and Osmonbekow et al. (2002) illustrate how software or e-tools are impacting both structure and processes of buying and with the help of tools, communication and transactions are enhanced. Easton and Araujo (2003) briefly mentions and raises the question of whether more communication is necessarily better for relationships. This is an interesting point for further studies since it is presumed that more is better. Iyer (2004) stresses the point that company and offering characteristics affect choices made regarding adoption of particular type of technology. By taking a value creation point of view, Boyd and Spekman (2004) illustrate how the Internet requires aligning its attributes with the economic and relational factors driving value creation. The Internet is seen as supporting digital resource sharing between parties. In other words, the Internet facilitates exchange of digital products, blue-prints, other digital documents, contracts and digital meetings enhancing R&D and new product development. Jap and Mohr (2002) provided a similar idea in that relational factors together with economic factors must be considered when discussing business relationships and technology usage. MacDonald and Smith (2004) illustrate how technology-mediated communication can control costs while at the same time maintains the personal touch. It can be seen that both adaptation and coordination and communication processes are most popular contribution area while exchange of different types of resources is rarely studied per se. In addition, a social aspect of business relationship digitization needs more elucidation in the future as its importance is noted in multiple studies (Clemons et al. 1993; Leek et al. 2003; Rao et al. 2003; Schurr et al. 2002).

Implications and future research

For academics and mangers we have provided an analytic review of studies that have highlighted the affects of digitization on business relationships. This study provides a basic description of the literature depicting the impacts brought by digitization on the structure and process of business relationships. Moreover, we have identified research void areas in the business relationship digitization discussion. It is clear from previous discussion that more research needs to focus on how technologies are exchanged within business relationships. Furthermore, impacts of digitization on the social relationships need more lucid elaboration. Another visible future research area is how digitization alters the coordination and communication processes when they are interfacing social and economical structure is unclear. Still, intend and unintended impacts of digitization depend on the business relationship type since there are many types of relationships from relational to transactional. Additionally, the phase of relationship also varies from just initiated to mature and almost terminated. Thus, relationship type as well as phase are heavily affecting on the likely results of digitization. This is due to the fact that the role and stage of each business relationship is different. Those may be thin purely transactional relationships or thick cooperative R&D type of knowledge sharing alliances. Thereby, digitization antecedents, adoption decision, implementation, and benefits of digitizing business relationships are often unique. Due to this diversity, we need elaborated studies focusing on business relationships with dyadic data sets from both sides of a relationship as well as longitudinal studies are needed to understand change processes i.e. active and passive periods. In addition, more studies are needed to focus on multiple technologies and their impacts. A clear limitation to this research is that we have selected 26 studies that present the diversity of research focusing on this phenomenon. Additionally, the analysis and synthesis of this cumulating research field is still in progress. Thus, we have not acknowledged studies that are similar to previous or are at the moment in developing stages i.e. conference and work in progress papers. The current study has only touched upon the surface of the next inter-organizational efficiency paradox, of digital relationships.

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