Diversity in Business-to-Business Information Exchange: An Empirical Analysis of Manufacturers and their Trading Partners

This article examines the performance implications of information exchange in industrial supply chains. While e.xisting literature has addressed the critical role of information exchange in supply chain integration, existing studies fail to address the specific characteristics of information e.xchange that ajfect performance. Through a transaction cost economics theoretical lens, hypotheses are developed and tested to explore the effects of information volume and information diversity on firm performance. The hypotheses are tested using an original dataset of twenty-three manufacturing firms that e.xchange information with their trading partners using an electronic intermedian. Results indicate a positive relationship for information volume and a negative relationship for information diversity as related to firm performance. The exchange of information between firms within supply chains is of great interest to both researchers and practitioners. Supply chain literature recognizes the value of exchanging information to improve the supply chain performance in key functional areas such as logistics (Daugherty et al. 2002: Lieb and Butner 2œ7). The exchange of information is noted for its role in interfirm integration, sharing of performance data, and transparency (Cruijssen et al. 2007). Information exchange is also recognized for its positive performance effects when leveraged to dampen the buliwhip effect (Lee et al. 1997; Cachón and Fisher 2000; Machuca and Barajas 2004; Steckel et al. 2004). Strategically, the leveraging of information exchanged between firms is noted for its effects on competition (Sanders and Premus 2002) and specific areas of firm performance (Zsidisin et al. 2007). Complimenting the research on information exchange from a supply Mr. Porlerfïeid is assistant professor. Department of eBusiness and Technology Management, College of Business and Economics, Towson University, Towson, Maryland 21252; e-mail tporterfîelà@towson.edu. The author would like to thank Brian Lowell from the University of Maryland • University College for his assistance in dala collection and validation as well as Joseph Bailey and Phil Evers from the University of Maryland College Park for their guidance in the development of this research stream. chain and logistics perspective is research on the use of information technology (IT) to span organizational boundaries. IT research recognizes thai using IT to exchange information within the context of supply chains provides additional benefits to the participants (Bakos and Brynjoifsson 1993; Mukhopadhyay et al. 1995; Mukhopadhyay and Kekre 2002). The benefits to firms include decreased inventory investment (Mukhopadhyay et al. 1995). improved customer service (Allen et al. 1992), and reduced shipment errors (Srinivasan et al. 1994). While firms may choose to exchange information with their trading partners in order to improve supply chain performance, they must balance the risks associated with providing information that can be used against them. Sharing forecast information with a supplier may allow the supplier to efficiently schedule production or it may alert the supplier to an opportunity to re-negotiate pricing. A supplier that uses information for opportunistic gain may impair the performance of its trading partner. Information exchange then becomes a doubleedged sword where it is a source of efficiency in coordinating firm resources across the supply chain but can allow firms to act selfishly. Prior research on information exchange has been limited to studies using perceived mea2008 DIVERSITY IN B2B INFORMATION EXCHANGE 37 sures of information exchange collected throujzh surveys (Whipple et al. 2(H)2l and modeling studies that have simulated information exchange (Cachón and Fisher 2000; Cachon and Lariviere 2001; Ángulo et al. 2004: Gauret al. 2005b). Even studies using objective measures of information exchange have been limited to the study of a single buyer to its multiple suppliers (Mukhopadhyay et al. 1995). This study takes a unique approach by using archival data of actual electronic information exchanges from multiple firms within an electronic exchange network. By observing information exchange occurring though an !T-enabled channel, this study utilizes unique measures of information exchange characteristics. This study uses specific IT-based measures to capture information exchange volumes and information exchange diversity.