Why Is Web-based Supply Chain Management Popular in China? A Factor Endowment's Perspective

Web-based system-to-human integration and direct system-to-system integration are alternative information technologies for supply chain management. Although the system-to-system mode is known to be more effective than the Web-based mode for data sharing, the web-based mode is dominant in the supply chain of Chinese firms. Is it a suboptimal or the most appropriate choice? We develop an analytical model to investigate how a manufacturer selects an optimal mode from competing technologies, including manual mode, Web-based mode and system-to-system mode. The contribution of this study is three-fold. First, the expected degree of information sharing influences the manufacturer’s selection. Manual mode is the optimal selection when the expected degree of information sharing is low, whereas system-to-system mode is the optimal choice when the expected degree is high. When the expected degree of information sharing is intermediate, Web-based mode is the optimal choice. Second, based on factor endowment theory, we find that labor endowment and technology endowment can influence the adoption intervals of these three modes. And third, when labor endowment is on the decline and technology endowment is on the rise in the early stage, the Web-based mode is the optimal choice than manual mode or system-tosystem mode. Theoretical and practical implications of these findings are discussed.