Assimilation and Diffusion of Web Technologies in Supply-Chain Management An Examination of Key Drivers and Performance Impacts

Assimilation and Diffusion of Web Technologies in
Supply-Chain Management: An Examination of

Key Drivers and Performance Impacts
C. Ranganathan, Jasbir S. Dhaliwal, and Thompson S.H. Teo
ABSTRACT:: A key reason for the popularity of integrated supply-chain management (SCM)
is that Web technologies have made supply-chain coordination a viable managerial and
strategic option. Building on research in the areas of management information science,
supply chains, and organizational innovation, this study explores the use of Web
technologies for organizational SCM. Based on an extensive survey of North American
organizations, it investigates the assimilation of Web technology systems into internal supply-
chain functions and their external diffusion into interorganizational supply-chain networks,
and also explores the relevant environmental determinants. The findings suggest that
internal assimilation and external diffusion of Web technologies both significantly affect
the benefits realized by SCM. Supplier interdependence and information technology (IT)
intensity are important environmental factors affecting external diffusion. Organizational
factors, such as centralization and formalization of the IT unit structure and high levels of
managerial IT knowledge, are significant drivers of Web technology assimilation in the
SCM function.
KEY WORDS AND PHRASES: e-business, information technology value, supply-chain

management, technology assimilation, technology diffusion, Web technologies.
After only a few years of commercial usage, the Internet has revolutionized
the way organizations conduct their businesses. The emergence of the Internet
and Web technologies has provided an opportunity for many firms to move
toward an extended enterprise business model—one that enhances value along
the total supply chain [52, 59, 61, 87]. Dell, General Electric, Cisco, Ford, and
other companies have claimed significant benefits through the use of Web
applications in their supply-chain management (SCM) function [2, 9, 59].
SCM encompasses a range of activities, such as purchasing, materials han-
dling, production planning and control, warehousing, logistics, inventory
management, distribution, delivery, and vendor management. The primary
objectives of the SCM function include cost reduction, service improvement,
improved communication and interaction among supply-chain partners, and
increased flexibility in terms of delivery and response times. Internet and Web
technologies have presented firms with significant opportunities in the forms
of efficient and timely order fulfillment, reduced cycle times, electronic pay-
ments, e-procurement, and more for improving their supply-chain perfor-
mance. Thus, it is not surprising that more firms are deploying Web-based
This research has been partially supported by grants from the Center for
Research in Information Management, UIC, Chicago, and Pontikes Center for
Management of Information, SIU, Carbondale. We thank the guest editors of the
special issue, reviewers, and participants of DIGIT workshop (2002), whose
suggestions greatly helped improve the manuscript.
International Journal of Electronic Commerce / Fall 2004, Vol. 9, No. 1, pp. 127–161.
Copyright © 2004 M.E. Sharpe, Inc. All rights reserved.
1086-4415/2004 $9.50 + 0.00.
128 RANGANATHAN, DHALIWAL, AND TEO
business-to-business (B2B) SCM systems, especially in the areas of e-procure-

ment and e-sourcing [37]. Firms are taking initiatives of many kinds, such as
building their own Web-based supply-chain systems, developing private
marketplaces (e.g., WalMart’s RetailLink and GE’s Global Exchange), joining
industry-oriented B2B exchanges (e.g., Transora.com), or joining the B2B hubs
of other third parties (e.g., VerticalNet). B2B e-commerce initiatives resulted
in a market that was worth $433 billion in 2000 and, according to the Gartner
Group, will grow to $6 trillion by the end of 2004 [67]. Jupiter Communica-
tions forecasts that $6.3 trillion worth of interfirm trade will take place over
the Web by 2005.
Although the benefits of Web technologies in the SCM function are well
acknowledged, the implementation of Web technologies and systems is chal-
lenging. Successful deployment of Web applications requires smooth integra-
tion of a number of organizational, functional, and technological factors [17].
In the SCM context, the success of a Web-based system is largely contingent
upon the extent to which the system is assimilated internally and diffused
among networks of business partners in a supply chain. Given these chal-
lenges in deploying Web-based SCM systems, several questions remain unan-
swered: Is the use of Web-based SCM systems an improvement over traditional
electronic data interchange (EDI) systems for interorganizational coordina-
tion? What benefits are realized by deploying e-business systems in supply
chains? How can organizations effectively diffuse and assimilate Web tech-
nologies in their SCM function? What managerial mechanisms are required
for successful deployment of Web systems in the SCM function?
The overarching theme of the present research is to gain an understanding
of the effective deployment of Web technologies in the organizational SCM
function. The objective is to develop an empirical understanding of the fac-
tors affecting the assimilation and diffusion of Web technologies in the SCM
function, and to assess the benefits of deploying Web technologies in supply
chains. Assimilation refers to the extent to which the use of technology perme-
ates organizational work processes and activities [3, 17, 20, 30]. Diffusion re-
fers to the degree to which the use of technology crosses organizational
boundaries into the activities of external business partners [30]. It focuses on
the extent to which suppliers and other business partners accept and adopt a
firm’s technologies and systems to conduct interfirm transactions. The ben-
efits of deploying Web technologies and systems are contingent upon the ex-
tent to which a firm internally assimilates these technologies in its internal
supplier-oriented activities as well as the degree to which Web technologies
are externally diffused into supply-chain interactions and transactions. The
following specific research questions are addressed:
• Do Web technologies and systems create any significant value in the
SCM function?
• How do the assimilation and diffusion of Web technologies affect the
benefits realized from deploying these technologies in the SCM
function?
• What are the key factors that affect the external diffusion of Web
technologies and systems in the SCM function?
INTERNATIONAL JOURNAL OF ELECTRONIC COMMERCE 129
• What are the key factors that affect the internal assimilation of Web
technologies and systems in the SCM function?
In contrast to the considerable amount of research effort in the area of tra-
ditional information technology (IT) systems, including interorganizational
systems (IOS) and EDI, there has been little empirical research on Web tech-
nologies and systems, especially in interorganizational settings. Web-based
systems are fundamentally different from traditional EDI systems, which were
based primarily on the idea of locking in customers and suppliers, and thereby
led to higher switching costs. Web technologies and systems, relatively inex-
pensive and highly flexible, have greatly reduced the switching costs of sup-
pliers and customers [78]. This makes it important to examine whether our
knowledge of interorganizational and EDI systems extends to the context of
Web systems. Given the increased usage of Web-based SCM systems, it is also
necessary to ascertain the true impact of these systems, and to identify the
factors that facilitate their assimilation and diffusion.
Although the literature on operations management is replete with studies
of the strategic and managerial aspects of SCM, it offers little on the applica-
tion of Web technologies in SCM. The information systems (IS) literature on
the usage and impact of Web technologies in the supply-chain function is also
limited. This paper addresses these gaps by examining the factors affecting
the assimilation and diffusion of Web technologies in supply chains and the
ultimate benefits of Web-based SCM systems.
Theoretical Background and Research Model
Two streams of research form the theoretical background for this study: the
notion of extended enterprise, used to understand the role of Web technolo-
gies in the supply-chain management function [24], and innovation diffusion
theory [90], widely applied in several areas, including IT adoption and diffu-
sion. These are supplemented by material drawn from the literature on IOS,
EDI, and e-business technologies and applications, and from the literature on
operations and SCM.
Innovation diffusion theory provides concepts and tools that aid in study-
ing technology evaluation, adoption, and implementation [90]. A number of
scholars have used innovation diffusion theory to examine the likelihood and
extent of technology adoption, assimilation, and diffusion in organizations
[29, 30, 81]. The theory has also been used to identify the many factors that
facilitate or inhibit technology adoption and implementation [39, 40, 79, 80].
The present paper draws upon the rich literature on innovation diffusion and
IT adoption and diffusion to understand how Web technologies are internally
assimilated into an organization and externally diffused into its supplier net-
works. According to innovation researchers, several characteristics of an or-
ganization and its environment affect the rate of technology assimilation and
diffusion. The focus here is on identifying some of the key factors in the spe-
cific context of Web technologies and their assimilation and diffusion in the
supply-chain function.
Web Technologies and Extended Enterprise
The concept of the extended enterprise is relatively new, and there is consid-
erable research in progress. Extended enterprise calls for cooperation and tight
integration of firms and their supply-chain partners, as opposed to discrete,
independent, and isolated activities across the supply chain [24]. The extended
enterprise concept builds on the SCM approach by seeing all the members
and partners of a value network as working toward a common goal or oppor-
tunity. A key aspect is the integration of the value chains of the various sup-
ply-chain partners into the organization’s internal value chain to yield new
value configurations [94]. Web technologies as well as traditional ITs have
had a fundamental impact on interfirm buyer–supplier relationships. Some
of the best-known success stories in airlines, hospital supplies, finance, and
other industries in the mid-1980s and 1990s were rooted in IT-enabled
interorganizational arrangements [48]. Thus, one can hardly doubt the poten-
tial role of ITs in influencing, enhancing, and extending interfirm buyer–sup-
plier electronic relationships.
Given the enhanced capabilities offered by Web technologies and the rela-
tive cost advantages of Web systems, many firms are deploying Web-based
supply-chain applications. For example, through the Cisco supplier connec-
tion (CSC), suppliers have access to Cisco’s enterprise resource planning (ERP)
order-fulfillment systems and inventory databases, and so can respond to cus-
tomer requests in real time. Cisco is able to track and transfer inventory be-
tween different manufacturers to respond to component shortages [56].
El-Sawy makes the case that just as business process reengineering (BPR) was
used as the managerial trigger for radically changing internal business pro-
cesses using new technology in the early 1990s, it is now imperative for orga-
nizations to radically redesign their interorganizational supply chains using
Web technology [27]. To this end, he presents a methodology that incorpo-
rates supply-chain redesign principles and an interorganizational workflow-
modeling tool. Firms that wish to become extended enterprises through the
deployment of Web-based supply-chain solutions must assimilate the tech-
nology internally and diffuse it among their supplier networks.
At present, the evidence about the performance impact of Web-based sup-
ply-chain systems is only anecdotal. Performance impact can usually be mea-
sured in terms of cost and time savings [36]. For example, using the Web for
SCM has enabled Cisco to reduce its operating costs by $75 million, and 45
percent of the products it sells are untouched by Cisco—they are shipped di-
rectly from suppliers to customers [56]. Similarly, Dell has used virtual inte-
gration of its supply chain to reduce its inventory to 11 days, compared to 80
days for its competitors. As a result, Dell can offer its customers the latest
technology at competitive prices, because the cost of carrying obsolete inven-
tory is reduced through rapid inventory turnover [64]. Despite the benefits
reported in anecdotal case studies, there is considerable ambiguity about the
value generated through such e-business applications, and about the relation-
ship between assimilation, diffusion of Web technologies, and the benefits
realized.
Development of Research Model
The assimilation and diffusion of information technology in organizations has

been of great interest to researchers on information systems for more than a
decade. Earlier studies did not differentiate internal assimilation and external
diffusion. Instead they used the term “diffusion” to represent the multiple
stages through which IT pervades organizational routines and processes. Most
studies emphasized a three-stage model of IT diffusion—initiation, adoption,
and diffusion—based on the classic innovation diffusion model proposed by
Rogers [90] and subsequently adapted to organizational theory, organizational
design, and individual, functional, and firm-level studies on innovation. The
three-stage model has been refined in IS research to more broadly conceptual-
ize the diffusion process, with substages of adaptation, acceptance, routinization,
and infusion [20]. Several studies view IT diffusion as an internal permeation
process extending from initial awareness to full institutionalization within the
firm [20, 30, 70], but a broader notion of the diffusion process has been adopted
in some research on the interorganizational use of IT. In several instances, re-
searchers on interorganizational systems and EDI have differentiated internal
and external diffusion, concentrating on the permeation of the diffusion pro-
cess in the extended value chain of a firm [46, 81, 83]. The present paper is
focused on the SCM function, which encompasses a range of internal organiza-
tional activities as well as interorganizational processes that stretch beyond firm
boundaries. In line with earlier research on IOS/EDI researchers, it treats both
internal assimilation and external diffusion.
The discussion in this paper operationally defines internal assimilation as
the extent to which Web technologies and applications are used in key inter-
nal organizational activities in the SCM function. External diffusion refers to
the extent to which the firm has integrated its supply-chain partners by using
Web technologies and systems to perform transactions with them. Assimila-
tion and diffusion, taken together, represent the infusion stage in the process
of innovation diffusion [81, 83]. Once it has adopted and adapted a technol-
ogy, a firm begins to use technology in a comprehensive and integrated man-
ner to support organizational work and transfers of technology both inside
and outside the organization. Internal assimilation and external diffusion to-
gether constitute the “infusion” stage in the overall diffusion process. Many
researchers have examined assimilation or diffusion separately [3, 17, 30, 82],
but very few studies have examined the constructs together [81, 83]. The studies
that examine both assimilation and diffusion treat them similarly, proposing
identical antecedents for the two constructs. However, the results show that
the factors that affect internal assimilation are not the same as the ones that
affect external diffusion among business partners [81, 83]. For instance, the
relative advantage of EDI, as perceived by the firm, was its influence on inter-
nal assimilation (but not diffusion), and the technical compatibility of EDI
was found to influence external diffusion only [81, 83]. Note that these studies
do not focus on the interrelationships between assimilation and diffusion. The
present research, in contrast, examines both these constructs and explores the
nature of the association between them.
Electronic B2B linkages among firms and suppliers have traditionally been
established using EDI via a value-added network. Because EDI systems are
proprietary and costly, smaller firms tend not to use them. The advent of user-
friendly Web browsers in the early 1990s gave rise to Internet-enabled EDI
and B2B systems that are affordable, even for smaller firms. The benefits of
EDI include quick response time, lower personnel costs, shorter purchase lead-
time, greater accuracy, and improved customer service [81]. In addition, Web-
enabled SCM offers several other advantages, such as ease of implementation,
platform independence, new marketing and sales channels, demand-manage-
ment capabilities, supplier-support capabilities, easy-to-use interfaces, and
track-and-trace functionality.
A key objective of SCM is the creation, maintenance, and real-time optimiza-
tion of an integrated and seamless supply chain for products and services across
functional and interorganizational boundaries through the integrated manage-
ment and synchronization of physical, information, and financial flows [2]. A
central theme underlying SCM involves integration and collaboration in op-
erational planning and execution, in relation to internal logistics functions (e.g.,
inventory management, production planning, cycle time reduction, warehous-
ing) and external supply-chain functions (e.g., distribution network coordina-
tion, transportation planning, integrated purchasing portals, interorganizational
or market-based coordination in reverse logistics, post-sales customer service,
technical support) [87]. The use of ERP systems for integrating internal manu-
facturing and logistics functions marked the first stage of IT-based SCM in or-
ganizations. The introduction of the Internet revitalized and accelerated this
trend, because it facilitated a second stage of Web-based SCM in organizations.
This stage focused on the external deployment of Web technology for SCM
applications, such as inventory synchronization, creating B2B marketplaces,
building aggregation portals, and building relationships. The idea behind such
initiatives was to promote the participation of suppliers in interfirm transac-
tions and to enhance the digital integration of firms and their suppliers. The use
of Web technologies and systems in SCM provides an opportunity to realize
efficiencies and cost-related benefits that improve internal information sharing
and processing. It also affords opportunities to improve business processes
through synchronized information exchange between firms and their supply-
chain partners [49].
The assimilation and diffusion of Web technologies in a supply-chain func-
tion are critically dependent on the external and internal organizational envi-
ronments. A set of factors likely to affect the assimilation and diffusion of Web
technologies in SCM was compiled by means of a literature review. The intent
here is to identify and examine a set of critical factors rather than to compre-
hensively list every potential predictor of Web technology assimilation and
diffusion in SCM. The review of the literature on IT diffusion, IOS, EDI, opera-
tions management, and SCM (see Table 1), identified the following key factors:
1. supplier interdependence
2. competitive intensity
3. IT activity intensity
4. managerial IT knowledge
Key drivers References
Supplier interdependence [16, 21, 44, 69, 75, 80]

Competitive intensity [39, 79, 80, 89]
IT activity intensity in industry [8, 11, 47, 83]
Managerial IT knowledge [4, 11, 17]
Centralization [10, 38, 39, 40, 75]
Formalization [39, 41, 58, 92]
Table 1. Key Drivers and References.
5. centralization
6. formalization of IT unit structure
The first three factors pertain to the external environment of the firm, and
the other three belong to the internal organizational environment. Research
indicates that internal factors are salient in respect to internal assimilation,
and external factors are dominant in diffusion [81, 83, 96]. Three factors from
the organizational environment (managerial IT knowledge, centralization, and
formalization) are expected to be associated with internal assimilation of Web
technologies and systems. The three factors pertaining to the external envi-
ronment (supplier interdependence, competitive intensity, and IT activity in-
tensity) are expected to be associated with the external diffusion of Web
technologies and systems in SCM. Fichman’s comprehensive review of IT dif-
fusion research notes the significant roles of external environmental factors
and internal organizational factors in IT diffusion and assimilation [29]. The
present paper argues that internal assimilation and external diffusion both
enhance the benefits of deploying Web systems in SCM. The overall concep-
tual model, with the research constructs and proposed relationships, is pre-
sented in Figure 1.
Supplier Interdependence
According to the resource-dependency perspective, organizations are depen-

dent on their environment for resources, and these dependencies constrain
organizational activities [76]. Firms gain access to needed resources by estab-
lishing relationships with other organizations, such as suppliers and other
partners. The resource-dependence theory emphasizes the power relationships
and interdependencies between firms and other entities in the environment
that influence their managerial activities. Research on SCM has identified sup-
plier interdependence as an important factor in the formation of supply-chain
partnerships [21, 69, 73]. Because IT systems, such as EDI, interorganizational,
and B2B systems, promote electronic partnerships across the entire supply
chain, supplier interdependence is likely to affect a firm or its supplier’s deci-
sion to use interorganizational Web systems.
A supplier’s decision to use a firm’s Web-based system will depend on the
interdependence of the firm and the supplier. Firms tend to use persuasive or
Organizational Environment
Benefits realized
from deployment of
Web technologies
in SCM
Figure 1. Research Model
coercive power to influence suppliers to adopt EDI systems [44]. Persuasive

tools include educating partners about benefits and helping them to adopt,
deploy, and implement systems. Coercive techniques include forcing part-
ners to adopt a technology or system, and threatening to drop them if they
refuse to do so. EDI and some of the earlier systems often required a propri-
etary standard for formatting and exchanging information. This limited the
flexibility of suppliers to establish electronic linkages with other partners. With
the advent of open standards and flexible Web technologies that are platform
and technology independent, however, it is now easy to establish multiple
partnerships or even switch partnerships [57, 78]. Firms and supplies that are
highly interdependent must work jointly to establish electronic linkages via the
Web. The interdependence of firm and suppliers influences the deployment of
IOS and EDI [16, 44, 80]. The more interdependent a firm and its suppliers are,
the more the firm should strive to diffuse its Web systems in its supply chain. A
firm with higher levels of supplier interdependence will go to greater lengths
to make its suppliers accept its Web systems and trade with it electronically
so as to improve the efficiencies of its supplier-related operations.
H1: The greater the interdependence between a firm and its suppliers, the
greater will be the external diffusion of Web technologies in SCM.
Competitive Intensity
Competitive pressure is an important variable influencing the deployment

and diffusion of IS [39, 46, 89]. Firms initiating IOS and EDI derive consider-
able benefits compared to those that follow [86, 88]. As a result, there is con-
siderable pressure on firms to initiate such systems and diffuse them among
their partners before their rivals do so. This pressure sometimes leads to the
use of coercive tactics to diffuse the systems among suppliers.
Firms that are first-movers in deploying IOS tend to derive more advan-
tage. Thus, there is significant pressure for them to diffuse systems quickly,
both internally and externally, in order to realize this gain. Peer pressure from
industry and other competitors may also force firms to deploy Web-based
applications faster. The fact that the value of B2B supplier networks and mar-
ketplaces is a function of the critical mass of participating partners increases
the pressure on firms in competitive settings to introduce SCM applications
before their competitors [91]. Firms in intensely competitive environments
are likely to expend considerable effort in diffusing Web systems to suppliers
so as to strengthen the integration with suppliers that could give them a com-
petitive advantage.
H2: The greater the competitive intensity facing a firm, the greater will be
the external diffusion of Web technologies in its SCM.
IT Activity Intensity in Industry
IT activity intensity refers to the extent to which a firm’s partners, suppliers,

customers, and competitors adopt and deploy IT in their business processes
and activities [84]. IT activity intensity represents the level of IT use by a net-
work of industry players. The amount of IT use by customers and suppliers
influences an organization’s IT activities and IT usage [11]. Bouchard states
that an organization’s decision on EDI “is primarily based on what [its] busi-
ness partners are doing, and not on the characteristics of EDI” [8, p. 366].
Higher levels of IT activity intensity in an industry imply IT-savvy suppliers
and business partners. Under conditions of IT activity intensity, suppliers will
more readily accept Web systems for conducting interfirm business transac-
tions. Higher levels of IT activity intensity in an industry imply better IT in-
frastructure and applications in the supplier firms that could facilitate easier
diffusion of new e-business systems. Iskander, Kurokawa, and LeBlanc found
that IT-savvy suppliers had better technical capabilities to easily adopt, inte-
grate, and use EDI systems [47]. Therefore, the more industry players deploy
and use information technologies, the greater will be the firm’s ability to dif-
fuse Web technologies and systems in its SCM activities.
H3: The greater the IT activity intensity in the industry, the greater will
be the external diffusion of Web technologies in SCM.
Managerial IT Knowledge
Managerial IT knowledge refers to the union of IT-related and business-re-

lated knowledge possessed and exchanged by IT executives, top managers,
and functional managers [11]. It is a conjunction of (a) top management’s tacit
knowledge of the strategic potential of IT, (b) functional management’s knowl-
edge of IT, and (c) the business-related knowledge of IT executives and per-
sonnel. The need for top managers and functional managers to understand
and value IT in order for IT to succeed is well understood and documented.
An effective alignment of IT and business objectives can only be achieved if
the CIO and the senior IT executives have a good knowledge of the business
domains in which the firm operates [4].
Boynton, Zmud, and Jacobs suggest that only an amalgamation of IT and
business knowledge can lead to effective technology diffusion [11]. Armstrong
and Sambamurthy found evidence that senior management’s IT knowledge
has a positive impact on the extent of IT assimilation [3]. They emphasize the
importance of creating mechanisms and structures to enhance the develop-
ment of managerial IT knowledge in organizations. Applying a resource-based
view of firms, Mata, Fuerst, and Barney identified managerial IT knowledge
as a critical capability in the successful deployment of systems for gaining
strategic benefits [66]. Chatterjee, Grewal, and Sambamurthy found senior
management leadership to be an important factor in the organizational as-
similation of Web technologies [17]. In another study, Purvis, Sambamurthy,
and Zmud found managerial IT knowledge to be an effective enabler of IT
assimilation [82]. For a firm to assimilate and deploy Web technologies into its
supply-chain activities, it is important that the senior leadership, the func-
tional managers responsible for SCM activities, and the IT managers have a
good understanding of Web technologies and of the strategic impact of Web
technologies on the SCM function.
H4: Higher levels of managerial IT knowledge will be positively associated
with greater assimilation of Web technologies in SCM.
IT Unit Structure
The structural perspective on organizations maintains that structural mecha-

nisms are at the core of organizational design [42, 51, 71]. In the IS context , the
structure of the IT unit is an important factor in the process of technology
assimilation. Several researchers have investigated the design of effective IT
unit structures [1, 12, 107]. Centralization and formalization are often cited as
key elements in IT unit structure [20, 85].
Centralization of IT unit structure refers to the extent to which the key de-
cision responsibilities for IT activities reside with the IT unit, as opposed to
the functional business units of the organization [13]. Research on IT adop-

tion and diffusion indicates that centralized structures inhibit the organiza-
tional adoption and diffusion of technologies. Grover and Goslar, in a study
of the assimilation of telecommunication technologies, found that there was a
negative relation between centralization and the adoption and implementa-
tion of technologies [40]. In another study, Grover found that centralization
significantly inhibited the adoption of customer-based IOS [39]. In light of
this, decentralized structures and cross-functional coordination mechanisms
are often suggested as ways to ease the IT assimilation process [1, 98]. In the
context of e-commerce, Earl and Khan suggested the use of multidisciplinary,
cross-functional teams to manage e-business efforts [25]. Chatterjee, Grewal,
and Sambamurthy found a positive association between coordination across
IT and other business units, and Web technology assimilation [17].
The literature on operations management also points to the significance of
decentralized structures. According to Bowersox and Daugherty, firms with
decentralized, flatter structures are likely to adopt innovative technologies to
improve organizational communication and coordination both internally and
with supply-chain partners [10]. Germain, Drodge, and Daugherty found that
decentralization significantly influenced decisions on integrative technologies
[38]. Williams, Magee, and Suzuki found a negative, although insignificant,
relation between centralization and few dimensions of EDI participation [100].
IT and SCM activities under centralized IT unit structures tend to involve
less participation by logistics and SCM managers as well as by external sup-
pliers. Operations, purchasing, and SCM executives are likely to possess greater
knowledge about supply-chain processes, and their cooperation and interac-
tion are important if the Web system is to be assimilated within the key orga-
nizational routines. Therefore,
H5: Centralization of an IT unit structure will be negatively associated
with the assimilation of Web technologies in SCM.
Formalization refers to the extent of reliance on formal rules, procedures,
and task committees for carrying out activities in an organization [39]. For-
malization of IT unit structure focuses on the use of formal systems, operating
procedures, and structural devices, such as teams, committees, and task forces,
in IT-related processes and activities. Despite its negative associations with
initiation/adoption [39, 41, 106], formalization is a positive facilitator for or-
ganizational technology assimilation [19, 58, 106]. Germain, Drodge, and
Daugherty found that formalization was a positive predictor of assimilation
of logistics technologies [38]. Researchers on organizational innovation have
documented the positive impact of formal structures on innovative behavior
in organizations [92].
The use of formal mechanisms is especially important in the context of
implementing a Web-based SCM system, because it spans across organiza-
tional boundaries and involves active participation by suppliers. A well-
documented procedure for developing and deploying an IT system will
facilitate the diffusion of the system among supplier networks. Some firms
rely on formal contractual agreements for implementing and diffusing EDI
and Web-based SCM systems. Common industry practice also involves the
use of formal joint teams and task forces to oversee Web project implemen-
tations [25].
H6: Formalization of IT unit structure will be positively associated with

the assimilation of Web technologies in SCM.
Assimilation and Diffusion of Web Technologies
Assimilation and diffusion are distinct, yet closely interrelated, constructs in

IS research [29]. These constructs assume greater importance in the case of
interorganizational technologies that involve two or more organizations. The
importance of these constructs is recognized in IOS and EDI research, but the
association between assimilation and diffusion has not yet been thoroughly
explored.
In a case study of Web-based procurement in a heavy equipment manufac-
turing firm, Chandrasekar and Shaw suggested that the benefits from the de-
ployment of a Web-based procurement system would be low unless the
e-procurement system was diffused to a larger set of suppliers [14]. Similarly,
Premkumar and Ramamurthy suggested that linking EDI with one supplier/
customer might be insufficient to justify the investments in EDI [79]. There-
fore, firms should expand their linkages to other trading partners to justify
the cost and increase the savings. The efficiencies and benefits derived from
initially using EDI with a single customer/supplier could motivate a firm to
expand its scope to include other trading partners, thereby facilitating exter-
nal diffusion [81].
Researchers have observed that interorganizational systems (e.g., EDI, Web
technologies) may become strategic necessities as their use increases [7, 68,
105]. Some firms may be motivated to adopt such systems as an essential part
of doing business, and this will facilitate external diffusion. Other firms may
try to retain competitive advantage by expanding their IOS network to in-
clude other trading partners, thereby lowering costs and increasing benefits
through leveraging the system across multiple partners.
According to Champy, business reengineering tends to be applied within
an organization to reduce cost and increase speed and productivity, whereas
the concept of X-engineering argues that organizations must extend their pro-
cesses outside the firm and form electronic linkages across organizational
boundaries [15]. Such linkages would be greatly facilitated by the use of Web
technologies among business partners. Bovet and Martha suggested, along
the same lines, that value net—a dynamic, high-performance network of cus-
tomer/supplier partnerships and information flow—exemplifies the business
design of successful firms like Dell and Cisco, which use Web technologies to
streamline their supply chains [9]. It follows that internal assimilation of Web
technologies within a firm is likely to be positively associated with external
diffusion outside the firm in order to create a value network that leverages
Web technologies more effectively for the common benefit of partners linked
to the network.
H7: Internal assimilation of Web technologies will be positively associated

with the external diffusion of Web technologies in SCM.
Performance Impact of the Assimilation and Diffusion of Web Technologies
The performance impact of IT has generated considerable interest. Research-

ers have investigated the returns on IT investments at the national, industry,
and firm levels, and the relationship between IT usage and business perfor-
mance [6, 22, 55, 63]. Although the findings on the performance impact of IT
are mixed, recent research suggests that systems usage is an important vari-
able that can explain the value generated from IT [23]. The importance of
systems usage has been pointed out by several researchers [44, 65]. Consistent
with these ideas, the present research examines the link between Web systems
usage in SCM and the benefits of using Web systems in SCM.
One of the questions asked in the present research relates to the value
and benefits of the use of Web technologies and applications in SCM. The
specific interest lies in examining whether the use of Web technology appli-
cations (theoretically defined in terms of assimilation and diffusion) is re-
lated to the performance impacts in SCM. The performance impacts of Web
technologies are captured through the benefits realized by utilizing these
technologies in SCM. This is in line with the goals- and benefits-based ap-
proach to performance measurement that is discussed in the SCM literature
[74]. The internal assimilation and external diffusion of Web technologies
into SCM serve as indicators of IT/systems usage, that is, the level of use of
Web technologies in the SCM activities of the firm. In some instances, firms
that have installed, commissioned, and used Web applications have reported
little or insignificant gain from the use of Web technologies [78]. This makes
it critical to examine the association between Web technology usage and the
benefits realized.
Research on IOS and EDI has identified significant organizational impacts
due to assimilation and diffusion of interorganizational systems. Iacovou,
Benbasat, and Dexter found that performance impacts were enhanced by in-
creased usage of EDI [46]. Lee, Clark, and Tam found significant performance
improvements as a result of EDI-enabled supply-chain reengineering in gro-
cery retail chain firms [60]. Chatfield and Yetton analyzed three case studies
of EDI implementation; they found that the extent of EDI usage by EDI initia-
tor firms and their partners is a key determinant of the strategic payoffs from
EDI [16]. Yao, Palmer, and Dresner reported significant improvements in sup-
ply-chain performance with the use of electronic systems, such as EDI and the
Internet [104]. Ramamurthy and Premkumar found that greater assimilation
and diffusion of EDI facilitated improved organizational performance [83].
They concluded, “In order to be able to truly exploit the large scale opera-
tional and strategic benefits potential that is latent in EDI, the adopter firm
will need to systematically plan and pursue more extensive internal and ex-
ternal diffusion of EDI.”
Research in operations management also indicates that Web systems have
a strong impact on the SCM function [59]. Frohlich and Westbrook proposed a
four-level model for Web-based integration between a firm and its suppliers
and examined the linkages between Web-based integration and the benefits
in terms of firm performance [35]. The four levels of Web-based integration
varied on two key dimensions: degree of Internet-based supply integration
and degree of Internet-based demand integration. The four levels represented
different points on a continuum. At one end of the continuum are firms that
have little or no Web-based integration with suppliers. At the other end is
complete Web-based integration, where the whole supply chain, from end-
customers to suppliers, is digitized. In between these polarities are firms that
partially digitize their supply chain—they Web-integrate either with their
suppliers or with business-customers. Based on survey data obtained from
senior operations executives, the study found that higher levels of performance
were associated with higher levels of Web-based integration. In a related study,
Frohlich found a positive connection between e-integration in supply chain
and performance [34]. In other words, firms that used Web technologies to
integrate more with their suppliers reaped greater performance benefits than
firms that had relatively lower levels of Web technology usage in their supply
chains. Hence, one may anticipate a positive relationship between Web-tech-
nology assimilation/diffusion in SCM and the benefits accruing from it.
H8: The greater the internal assimilation of Web technologies in SCM, the
greater will be the benefits realized from it.
H9: The greater the external diffusion of Web technologies in SCM, the
greater will be the benefits realized from it.
Research Methodology and Data Analysis
Measures
Most of the constructs in this study are measures from the literature that were
adapted to the context of the study. Multiple-item measures were used to as-
sess the research constructs. All the items were measured using a 7-point Likert-
like scale. The content validity of the measures was assessed by pretests with
knowledgeable experts and IT managers.
The items for measuring assimilation tapped the extent to which Web tech-
nologies and applications were used in internal supply-chain activities. As-
similation was assessed by asking respondents about the extent to which they
used Web technologies and applications in five internal SCM activities: (a)
supplier selection (getting quotes, bids, etc.), (b) purchase-order processing,
(c) procurement from suppliers (distribution, warehousing, logistics, etc.), (d)
invoicing and payment processing, and (e) demand management and pro-
curement analysis. The initial set of activities was derived from the literature
on SCM and was refined and validated by the pilot tests [26, 93, 95, 101].
External diffusion was measured using three items that asked respondents
to indicate how many suppliers they had interacted with using Web technolo-
gies, total supplier transactions done using Web applications, and overall sup-
plier interactions handled through Web applications. These items were adapted
from Premkumar, Ramamurthy, Nilakata [81] and Ramamurthy and
Premkumar [83].
Supplier interdependence was measured using four items adapted from
Premkumar and Ramamurthy [79]. These items measure a firm’s dependence
on its suppliers and the reciprocal dependence of suppliers on the firm. The
measurement was based on responding firms’ perceptions of their interde-
pendence with their suppliers.
Three items capturing the competitive intensity construct were derived from
Germain, Drodge, and Daugherty [38]. These assessed the perceptions of the
responding firm on the extent to which it monitors and keeps track of com-
petitors in the industry. IT activity intensity was measured using four items
obtained from Purvis, Sambamurthy, and Zmud [82]. These focused on the
extent of IT usage and levels of IT-related activities among suppliers, custom-
ers, competitors, and other business partners.
Eight items used to measure managerial IT knowledge were adapted from
Armstrong and Overton [4] and Boynton, Zmud, and Jacobs [11]. Four items
assessed the strategic IT and e-business knowledge of top management, their
understanding of the potential impacts of Web technologies, and the extent of
their support of e-business initiatives in the firm. Two items focused on the
knowledge of functional executives, and two tapped the business-related
knowledge of IT executives.
The measures for centralization and formalization of IT unit structure were
adapted from Grover and Goslar [40] and Ranganathan and Sethi [85]. Five
items were used to measure the centralization of IT unit structure. These tapped
the extent to which the locus of responsibility for five key IT activities (de-
rived from [13]) was concentrated in the IT unit as opposed to functional units.
Formalization was assessed using four items that tapped the extent to which
the IT unit had clear job descriptions for IT personnel, rules and procedures
for handling various IT activities, committees and task forces for performing
IT tasks, and formal procedures and guidelines for evaluating new technolo-
gies and systems.
The performance impact of Web technologies in SCM was captured from
the perceptions of the respondents about the benefits realized since the imple-
mentation of Web technologies in SCM. Based on Iacovu, Benbasat, and Dex-
ter, Otto and Kotzab, and Ramamurthy and Premkumar, six items were used
to assess the benefits from Web technologies in supplier-oriented activities
[46, 74, 83]. These items measured the extent to which Web applications re-
sulted in improvements pertaining to customer service, cost reduction, inven-
tory management, cycle-time reduction, supplier-relationship management,
and generation of competitive advantage.
Table 2 outlines the measures used in this study. The survey instrument
was initially tested with six academic experts, and iterative refinements were
made. It was then pretested with eight senior IT managers who had consider-
able experience in e-commerce system deployment. During interviews with
these senior IT managers, their feedback was obtained on the questionnaire
after they had completed the survey. Refinements were made at each stage
based on the feedback from the pilot-test respondents.
Constructs and items Loading
Supplier interdependence
Importance of having continued business relationship with suppliers 0.74
Significant proportion of total profits related to profits from sale/service to suppliers 0.81
Dependence of suppliers on firm for achieving their business goals 0.77
Bargaining power of suppliers/partners 0.80
Competitive intensity
Tracking new initiatives of competitors 0.93
Monitoring competitor moves 0.92
Competitor information considered important for firm’s decisions 0.90
IT activity intensity
IT activities and practices of competitors 0.88
Use of IT by key suppliers 0.81
Use of IT by key customers 0.75
Use of IT by key business partners and other agents 0.87
Managerial IT knowledge
Top management’s interest in use of Web applications in firm 0.89
Top management’s consideration of Web applications as important to firm 0.91
Top management’s commitment to support Web applications in firm 0.94
Top management’s knowledge of potential of Web for future success of firm 0.90
Functional management’s knowledge of potential of Web for future success of firm 0.87
Functional management’s knowledge of potential of Web in improving business processes 0.87
IT management’s knowledge of business operations of the firm 0.84
IT management’s knowledge of business strategies of firm 0.81
Centralization of IT unit structure
Locus of decision-making responsibilities for
Application development and outsourcing 0.72
Procurement of hardware and software 0.80
IT operations and maintenance 0.88
Staffing IT positions 0.72
Capital budgeting decisions related to IT 0.72
Formalization of IT unit structure
Documented job descriptions for IT personnel 0.84
Use of operating rules and procedures for IT activities 0.81
Use of task forces and committees for IT activities 0.65
Use of formal procedures and guidelines for evaluating new technologies and ideas 0.72
Assimilation
Extent to which Web applications are used in—
Supplier selection (getting quotes, bids, etc.) 0.87
Purchase-order processing 0.91
Procurement from suppliers (distribution, warehouse, logistics, etc.) 0.92
Invoicing and payment processing 0.91
Demand management (procurement analysis) 0.84
Diffusion
Proportion of total suppliers who interact with firm through Web 0.94
Proportion of total supplier transactions done through Web 0.97
Proportion of overall interactions with suppliers through Web 0.95
Web-technology Impact
Perceived benefits realized from Web technology
Improved customer service 0.89
Better inventory control 0.93
Reduced operations costs 0.92
Reduced cycle time 0.93
Better relationship with suppliers 0.92
Generate competitive advantage 0.88
Table 2. Measurement Model Loadings.

Method and Sample
A field survey method was adopted for the study. An initial sampling frame
was assembled from the ACR directory of top computer executives in North
America and from senior IT executives of organizations listed on the Toronto
Stock Exchange’s Listed Company Directory. From these sources, 1,200 orga-
nizations with more than 500 employees and at least 20 IT personnel were
randomly selected. The target respondent in each firm was the highest-rank-
ing IT executive, often the CIO. The initial survey in the summer of 2001 was
followed by two reminders. The questionnaire and reminders produced 249
responses, a response rate of 20.75 percent, which is comparable to similar
studies [39, 40, 83]. Because the research was focused on the assimilation, dif-
fusion, and performance impacts of Web technology deployment in SCM, only
firms that had already implemented Web technologies in the supply chain
were included in the final analysis. Of the 249 respondent firms, 176 had de-
ployed Web technologies in supplier-related activities. In line with the research
goals, only these responses were considered in the final analysis.
Table 3 presents the demographic profiles of the respondent firms. The
sample had a heterogeneous representation in terms of industry categories.
The firms in the sample were fairly distributed across different industry groups
in manufacturing and service-related sectors. About two-thirds had annual
revenues in excess of $50 million. Because the research sought to assess the
benefits of Web technology deployment in SCM, data were obtained about the
period in which the firm deployed it. As shown in Table 3, all the firms in the
final sample had already implemented Web technologies in SCM. Almost half
the firms in the sample had deployed Web technology less than two years be-
fore the survey was administered, and the others had deployed it much earlier.
The CIO or the senior IT executive was reached in most cases. More than
half of the respondents held the most senior IS positions in their firms. About
a fifth were from IS management or the equivalent. Interestingly, 12 percent of
the respondents had titles allied to Web-related functions in the organizations.
Overall, the respondent profile gives good confidence in the data obtained by
the survey.
Response bias is always a concern in survey research, especially when the
response rate is low. As indicated earlier, the response rate was comparable to
similar studies. However, several steps were taken to assess response bias.
Following Armstrong and Overton, the early respondents and late respon-
dents were compared on a number of parameters [4]. The logic of this com-
parison is that late respondents tend to closely resemble nonrespondents [50].
Nonrespondent bias was checked by comparing early and late respondent
firms on all the key research constructs in the model. The t-tests revealed no
significant differences in the means of the research constructs between the
two groups. Second, on the assumption that a significant correlation between
item scores and survey response time would indicate response bias, all the
correlations between the mean scores of the research constructs and response
time were examined, and none were significant. Third, industry bias was also
examined. Because there were more than 13 industry groups in the sample,
with fewer than five firms in some of the industries (see Table 3), they were
Industry Frequency %
Manufacturing/engineering 32 18.2
Chemical 3 1.7
Finance/banking/insurance 26 14.8
Computer/IT 14 8.0
Medical/health care 5 2.8
Oil/gas/energy 6 3.4
Business services 9 5.1
Real estate/property 7 4.0
Publishing/information/news 6 2.4
Transportation/logistics 12 6.8
Retailing/wholesale/trading 24 13.6
Hotel/travel/tourism 6 3.4
Other 17 9.7
N/A 10 5.7
Total 176 100.0
Annual revenue level Frequency %
<1 million 1 0.60

1.1– 5 million 4 2.3
5.1–10 million 13 7.4
10.1–50 million 39 22.3
50–100 million 56 31.8
>100 million 62 35.2
N/A 1 0.6
Total 176 100.0
Time elapsed since Web technology deployment Frequency %
<1 year 9 5.11

1 year 39 22.16
2 years 41 23.30
3 years 24 13.64
4 years 29 16.48
≥5 years 19 10.80
N/A 15 8.52
Total 176 100.0
Title of respondent Frequency %
CIO/CTO/vice president for IS/senior vice president for IS 63 35.80

Senior director/director for IS 28 15.91
General manager/manager, vice president, or assistant director for IS 35 19.89
Vice president/director for e-business 6 3.41
General manager/e-business manager 14 7.95
Project manager/project leader for e-business 5 2.84
IS project manager, executive manager/other 6 3.41
N/A 19 10.80
Total 176 100.00
Table 3. Demographics of Responding Firms.
regrouped into seven industry categories in order to perform chi-square tests.

The respondent and late-respondent groups were compared to see whether
they differed across the industry representations, and no significant differ-

ences were found. Similarly, the distributions of the revenue levels of these
two groups were compared, and no significant differences were detected.
Fourth, to test for sample bias, the respondent firms that had returned usable
questionnaires indicating that they had deployed Web-based systems in the
supply chain (n = 176) were compared with those that had indicated other-
wise (n = 73). The chi-square test on the revenue levels suggests a possible
bias (χ2 = 39.75; p < 0.1), implying that the respondent firms that had deployed
Web-based supply-chain systems were large firms with fairly high levels of
revenue. Therefore, the results need to be interpreted with caution inasmuch
as they may be applicable only to larger firms.
Analytical Techniques
The research model was tested with structural equation modeling (SEM) us-
ing the partial least squares (PLS) approach [62, 102, 103]. PLS is a second-
generation modeling technique that simultaneously assesses the quality of
measurement of research constructs (i.e., measurement model) and the inter-
relationships between the constructs (i.e., structural model). Unlike other SEM
techniques, such as LISREL, that use maximum likelihood estimation to gauge
the fit between a theoretical model and the covariance matrix of the observed
data, PLS assesses the relationships between the research constructs, and be-
tween the constructs and their measurement items, so that the error variance
is reduced. Whereas LISREL tests a model and produces fit measures explain-
ing how well the observed data fits the theoretical model, PLS seeks to ex-
plain the relationships within a model [32]. PLS assesses the predictive
relationships in the model and tests how well one part of the model predicts
values in other parts. Therefore, PLS is better for analyses of exploratory models
with no or little rigorous theoretical grounding but where explaining the con-
struct interrelationship is desired [31]. Moreover, PLS works under conditions
of nonnormality and can handle smaller samples. All of these qualities have
earned PLS wide acceptance by IS scholars [3, 18, 85].
The present research assessed a set of interrelationships among key factors,
assimilation/diffusion of Web technologies, and the benefits realized from
Web systems. The primary focus was on the strength of the relationships in
the model. The sample comprises 176 cases, which is considered adequate for
PLS analysis. Therefore, PLS was the appropriate analytical technique for the
study.
Measurement Model
The data analysis began by assessing the mensurational properties of the re-
search constructs. Testing a measurement model involves examining the in-
ternal consistency, convergent validity, and discriminant validity of the
constructs. Internal consistency was examined using composite reliability.
The traditional reliability measure of Cronbach’s α assumes equal weight for
Composite Average variance

Construct reliability extracted
Supplier interdependence 0.70 0.77

Competitive intensity 0.85 0.92
IT activity intensity 0.73 0.83
Managerial IT knowledge 0.80 0.88
Centralization of IT unit structure 0.71 0.77
Formalization of IT unit structure 0.75 0.76
Assimilation 0.82 0.89
Diffusion 0.92 0.95
Benefits realized from Web Technologies in SCM 0.85 0.91
Table 4. Reliability and Average Variance Extracted of Constructs.
the items measuring the construct and is influenced by the number of items in
the construct. In PLS, however, composite reliability relies on actual loadings
to compute the factor scores and is therefore a better indicator of internal con-
sistency. As shown in Table 4, the composite reliability values for the con-
structs in the model were all above the suggested threshold of 0.7 and thus
supported the reliability of the measures.
Convergent validity refers to the extent to which two or more items mea-
suring the same variable agree. Two tests were used to assess convergent va-
lidity. The first was item reliability, which examines the factor loading of each
item on the variable. Falk and Miller recommend a loading level of 0.55 to
assess item reliability [28]. As can be seen in Table 2, all the items had a load-
ing above the suggested threshold, thus providing support for item reliability.
The second test for checking convergent validity is average variance extracted
(AVE). The AVE for a construct reflects the ratio of the construct’s variance to
the total amount of variance among the items. Table 4 shows that the AVE
values for all the constructs were above the limit of 0.50 advised by Fornell
and Larcker [33]. Hence, the variables in the measurement model demon-
strated adequate internal consistency and convergent validity.
Discriminant validity refers to the extent to which a given construct differs
from other constructs. Two tests were used to evaluate discriminant validity
at both the item and construct levels. According to Barclay, Higgins, and
Thompson, no item should load more highly on another construct than it does
on the one it is intended to measure [5]. Table 2 presents the loadings for the
hypothesized relationships between the construct and its measures. The table
indicates adequate discriminant validity at the indicator level. At the con-
struct level, discriminant validity is adequate when the variance between a
construct and any other construct in the model is less than the variance of the
construct with its measures [31]. The variance shared by any two constructs is
obtained by squaring the correlation between them. The variance between a
construct and its measures corresponds to the AVE. Discriminant validity was
evaluated by comparing the square root of the AVE for a given construct with
the correlations between the construct and all other constructs. Table 5 pre-
sents the construct intercorrelations, and Table 4 presents the values of AVE.
Realized
M SD benefits Assimilation Diffusion Centralization
Realized benefits 2.99 1.34 1.00

Assimilation 3.11 1.74 0.74 1.00
Diffusion 2.94 1.61 0.73 0.73 1.00
Centralization 5.24 0.97 –0.21 –0.31 –0.24 1.00
INTERNATIONAL JOURNAL OF ELECTRONIC COMMERCE

Formalization 4.37 1.25 0.22 0.39 0.23 –0.11
Supplier interdependence 4.10 1.09 0.26 0.23 0.30 –0.02
Competitive intensity 4.85 1.32 0.05 0.18 0.20 –0.15
IT activity intensity 4.18 1.28 0.45 0.44 0.46 –0.30
Managerial IT knowledge 4.88 1.36 0.19 0.26 0.17 –0.12
Supplier Competitive IT activity Managerial IT

Formalization interdependence intensity intensity knowledge
Realized benefits
Assimilation
Diffusion
Centralization
Formalization 1.00
Supplier interdependence 0.03 1.00
Competitive intensity 0.29 0.10 1.00
IT activity intensity 0.26 0.09 0.16 1.00
Managerial IT knowledge 0.24 0.11 0.08 0.30 1.00
Table 5. Descriptives and Intercorrelations.
147
Benefits realized
from deployment of
Web technologies
in SCM
Figure 2. PLS Structural Model

*p < 0.01
In every case, the shared variance between two variables was less than the
AVEs, satisfying the requirements of discriminant validity.
Structural Model
Partial least squares is a nonparametric estimation procedure, and it does not
offer significance tests based on statistical distributions. The size and signifi-
cance of the paths in the model were examined by using bootstrapping to
estimate parameters, standard errors, and t-values [72]. A total of 250 random
samples of observations was generated from the original data set by sampling
through replacement, where each sample size was similar to the number of
cases in the original data set. The resulting PLS structural model, along with
the path coefficients and their significance values, are shown in Figure 2 and
Table 6.
All the hypothesized paths, with the exception of the one linking competi-
tive intensity and the diffusion construct, were found to be significant (p <
0.01). The model accounted for 24.3 percent of the variance in internal assimi-
Path
Hypothesis Path coefficients
1 Supplier interdependence → Diffusion 0.134*

2 Competitive intensity → Diffusion 0.045
3 IT activity intensity → Diffusion 0.175*
4 Managerial IT knowledge → Assimilation 0.151*
5 Centralization of IT unit structure → Assimilation -0.253*
6 Formalization of IT unit structure → Assimilation 0.324*
7 Assimilation → Diffusion 0.601*
8 Assimilation → Realized benefits from Web technologies in SCM 0.440*
9 Diffusion → Realized benefits from Web technologies in SCM 0.407*
Table 6. Results of PLS Structural Model.

*p < 0.01.
lation, 58.1 percent of the variance in external diffusion, and 62.1 percent of
the variance in the realized benefits from deploying Web technologies in SCM.
These figures imply that the study’s constructs and the predicted paths ac-
counted for a significant portion of the variance in the dependent variables.
The analysis was rerun after the PLS model was revised by removing the
path between internal assimilation and external diffusion. This reduced the
multiple correlation square value for external diffusion from 0.581 in the origi-
nal model to 0.291 in the revised model. Without the linkage between assimi-
lation and diffusion, the model accounted for 29.1 percent of the variance in
external diffusion. However, with assimilation added as a predictor variable,
the variance explained in diffusion increased to 58.1 percent. This offered ad-
ditional support for H7, which proposed a positive association between inter-
nal assimilation and external diffusion.
All of the hypotheses except H2 were supported by the study. Interdepen-
dence of suppliers and IT activity intensity were found to influence external
diffusion positively, whereas managerial IT knowledge and formalization of
the IT unit structure were positively associated with assimilation of Web tech-
nologies in SCM. As expected, centralized IT unit structure was negatively
associated with assimilation. The impact of Web technologies in SCM was
found to have strong positive associations with both the internal assimilation
construct and the external diffusion construct. This implies that Web tech-
nologies are likely to have stronger positive impacts on SCM if the technology
is both internally assimilated and externally diffused in the SCM function.
Discussion and Conclusions
More and more firms are adopting Web technologies and systems in their
supply-chain operations, but there has been little empirical research on the
assimilation and diffusion of these systems, their key drivers, and the perfor-
mance impacts. Drawing upon theoretical perspectives from organizational
theory, IS research, and SCM research, the study described in this paper in-
vestigated the key environmental and organizational factors that affect the
assimilation and diffusion of Web technologies in SCM and the resultant per-
formance impacts.
Among environmental factors, IT activity intensity and supplier interde-
pendence were found to have a positive relationship on the diffusion of Web
systems in SCM. The greater the mutual dependence between a firm and its
suppliers, the greater the likelihood that the firm will diffuse Web technolo-
gies among its supplier networks. This significant result for supplier interde-
pendence has another interesting dimension related to the argument that Web
technologies, unlike EDI systems, lower the switching costs of B2B relation-
ships with suppliers. If the enhancement of Web technology diffusion when
there is greater mutual dependence can be expected to lower switching costs
in the long term, this will aid in the transformation of static supply chains into
dynamic supply chains, as characterized by Kumar and Christiaanse [57]. They
argue that dynamism in the choice of partners in the supply chain is a critical
requirement for supply-chain transformation.
The findings regarding the impact of IT activity intensity on the diffusion
process are interesting. When key supply-chain players begin to use Web tech-
nologies, other firms respond to the peer pressure to adopt the technologies,
especially if their SCM operations are tied closely to those of outside parties.
Thus, it is not an internal need for Web connectivity, but the need to establish
external SCM connectivity and supplier interdependence, that apparently
drives the diffusion of Web technologies. No support was found for the view
that competitive intensity per se influences Web technology diffusion. In all
probability, the IT activities of competitors and the extent of IT use in the in-
dustry have a stronger impact than the competitive pressure faced by firms.
These results are similar to those of Iskander, Kurokawa, and LeBlanc, who
reported an insignificant relationship between competitive intensity and the
extent of EDI adoption and integration [47].
Of the organizational variables, higher levels of managerial IT knowledge
were found to have a positive effect on the assimilation process. This comple-
ments the results obtained by Armstrong and Sambamurthy and by Chatterjee,
Grewal, and Sambamurthy, who found that collective IT knowledge in the
organization is a key predictor of technology assimilation [3, 17]. Organiza-
tions with an enlightened understanding of the strategic potential of Web tech-
nology for improving SCM assimilate Web technology more easily and
pervasively than firms whose senior business and IT executives lack such
knowledge and understanding.
The study also found that IT unit structures had a significant effect on the
assimilation of Web technologies in SCM. Web-based supply-chain projects
need active participation from operations, logistics, warehousing, and other
functional managers apart from IT executives. Only a collective effort can
enhance the effective usage of Web technologies in SCM. The use of formal
mechanisms, such as guidelines and rules, and the assignment of formal re-
sponsibilities to task forces or interdisciplinary teams for executing Web-based
SCM projects, augment Web-technology assimilation.
It is also important to consider the positive relationship between the inter-
nal assimilation and external diffusion of Web-based SCM applications. Until
now, research has largely ignored this critical linkage, possibly because of an
assumption that the two constructs are separate and distinct. The present find-
ings, however, suggest that they are closely linked. Firms that have e-enabled
their internal supply-chain operations, such as manufacturing logistics, in-
ventory planning, and warehouse management, are more likely to succeed in
diffusing these technologies into the interorganizational supply chain. This
empirical finding lends support to the idea that before moving forward on
ambitious plans for the use of Web technologies for B2B transactions and co-
ordination with supply-chain partners, organizations should first ensure that
their internal processes and “back-end” logistics systems are adequately
Internet enabled. Much like the lesson learned by many virtual e-retailers
during days of the dot-com boom, it is imperative for organizations to pay as
much attention to the assimilation of Web technologies for internal logistics
coordination as to the interorganizational diffusion of Web-based systems with
their supply-chain partners.
From a research perspective, the critical link between the internal assimila-
tion and external diffusion of new technology applications is very important.
Past MIS research on the diffusion of EDI and IOS may have assumed that the
internal assimilation of new technologies builds capabilities that improve a
firm’s ability to diffuse IOS in the extended enterprise. However, the reverse
influence of the external diffusion of IS technologies/capabilities on longitu-
dinal, internal assimilation within organizations could possibly be a motiva-
tion for the study of several recently observed phenomena, such as
informational cascades, information system waves, and mimetic imitation in
new technology acquisition [53, 54, 97, 99].
Researchers and practitioners are focusing more attention on the perfor-
mance impact of Web technology and systems. The study found significant
positive associations between both assimilation and diffusion of Web tech-
nologies and the benefits from Web technologies in SCM. This shows that
greater usage of Web systems in SCM is likely to improve performance in the
areas of customer service, cost reduction, inventory management, cycle-time
reduction, supplier-relationship management, and overall competitive advan-
tage. These results are consistent with those of Frohlich and of Frohlich and
Westbrook, who found that stronger e-integration between a firm and its sup-
pliers influenced performance [34, 35]. A firm seeking to derive greater ben-
efit from Web systems needs to concentrate as much on internally assimilating
these systems into its operations as on externally diffusing them across its
supplier networks. Thus, the present study directly complements the studies
that emphasize system usage as a significant influence on the value generated
from IT [23, 65].
Contributions to Research and Practice

The study summarized in this paper has made some significant contributions:
1. It adds to the emerging body of research on Web technology assimi-
lation and diffusion in organizations by throwing light on the
performance impacts of Web technology diffusion and on the key
factors affecting Web technology assimilation and diffusion.
2. It provides insights into real-world Web-SCM efforts, an area where

there have been relatively few empirical studies based on field data
because of the dominance of analytical modeling and practitioner
case study as the main approaches to the study of SCM. The organi-
zational factors that need focus when a firm is embarking on e-
business initiatives are identified. The importance of improving and
sustaining higher levels of managerial IT knowledge and designing
organic IT unit structures is highlighted. Formalization generally
inhibits innovation in organizations, but formalizing IT activities
and processes could greatly facilitate the organizational assimilation
of Web technologies.
3. It takes a holistic approach, in contrast to earlier studies, which
focused either on assimilation or on diffusion but not on both. A
holistic approach that examines the two concepts and their interrela-
tionships facilitates better understanding of Web technology assimi-
lation and diffusion in SCM. The results indicate that external
diffusion is contingent upon internal assimilation of Web systems,
and both constructs collectively contribute to the benefits realized
from Web applications.
4. It provides strong evidence that the returns from Web applications
in SCM will be positive. Firms can maximize the benefits of Web
technology by assimilating these technologies with their internal
processes and by externally diffusing them in their supply chains.
5. It is grounded on existing theories of innovation diffusion and the
extended enterprise. By building on earlier research, the study
shows how these theories can be used to explain the assimilation
and diffusion of Web-based SCM.
Given the critical role of Web technologies in the implementation of SCM,
it is important to understand the implications of the study’s findings for
practice.
1. An understanding of the key factors affecting SCM assimilation and
diffusion will put practitioners in a better position to design appro-
priate strategies to deal with SCM deployment and, consequently, to
enhance its benefits.
2. The IT unit plays a critical role in the implementation of SCM. Given
that structural attributes, such as centralization and formalization of
the IT unit and managerial IT knowledge, significantly affect
assimilation, it is imperative for top management to think carefully
about the role of IT managers in SCM initiatives. Before beginning a
major SCM program, managers may want to think about imple-
menting managerial mechanisms that will improve managerial IT
knowledge and ensure decentralization and formalization of IT
management and decision making.
3. The same lessons apply to IT managers faced with supporting
organizational SCM programs and can guide them in adopting
appropriate guidelines and managerial postures that will ensure
successful Web-related SCM initiatives.
4. Organizations may want to adopt a two-pronged “internal assimila-

tion/external diffusion” strategy in dealing with the IT challenges
posed by the use of Web technologies for SCM, because both of these
factors will yield significant performance impacts. Even if they are
cognizant of the interrelationship between assimilation and diffu-
sion, managers may want to note that internal logistics assimilation
of Web technologies for SCM yields benefits.
5. The dynamics of implementing Web-based systems in SCM will be
more challenging for managers operating in environments charac-
terized by high levels of supplier interdependence and IT activity
intensity. Careful consideration must be given to planning and
implementing Web-based SCM systems in such environments.
6. The study provides a basis for managerial thinking about the types
of performance benefits that can be expected from investments in
Web technology applications for SCM.
7. The study’s empirical evidence on performance benefits should
assure top management that investments in Web-based technologies
for SCM are worthwhile.
Limitations and Future Research
The study has some important limitations. To begin, its results are based on
the perceptions of senior IT executives rather than SCM managers, because
all of the respondents were senior IT executives. However, given that the re-
search constructs examined levels of IT knowledge, IT unit structure, and IT
usage, senior IT executives were appropriate respondents. Future research
can examine the perceptions of top managers and SCM managers with regard
to Web-based SCM assimilation and diffusion.
Another important limitation pertains to the common method bias. When
data on research variables are collected from the same source at one time, the
relationships between variables may be contaminated by biases in the source
that can lead to inflation in observed relationships. Several procedural and
statistical steps were taken to address the problem of method bias because it
is so important a concern. The variables were not placed in any particular
order in the survey administered to the respondents. Some dependent vari-
ables were placed ahead of independent variables to diminish the cognitive
complexity of the judgments made by the respondents when answering the
questions. Harman’s single-factor test (see Podsakoff and Organ [77]; Harman
[43]) was used by performing factor analysis to examine common-method
bias. This test holds as a fundamental principle that if there is a substantial
amount of common-method variance in the data, either a single factor will
emerge from the data when all the dependent and independent variables are
entered together, or a general factor that accounts for most of the variance will
result. The factor analysis indicated the existence of nine factors that were
consistent with the research model.
Another limitation is the use of a single respondent from each target firm,
without collecting and cross-validating responses from other informants in
the same firm. The use of single respondents is questionable, because relying
on only one informant to make complex social judgments about organiza-
tional characteristics increases random measurement error. However, the cost
of using multiple informants and the possibility of lower response rates were
deterrents against the use of multiple respondents. The survey was targeted
to senior IT executives in an attempt to minimize the common method vari-
ance. Senior IT executives are more objective and knowledgeable about the
operations and strategies of their firms, and thus were in a position to answer
questions pertaining to organizational and environmental characteristics. Fu-
ture research can mitigate the problem of common method bias by collecting
data from more than one respondent per firm and comparing the perceptions
of different stakeholders in SCM assimilation and diffusion.
Because the concepts used in the study relied on subjective measures, the
benefits realized from the deployment of Web technologies were evaluated
from subjective indicators rather than objective, tangible measures. Thus, the
responses about the benefits of e-business technologies reflect the perceptions
of the responding executives rather than actual or quantified benefits. Future
researchers could incorporate objective measures, especially for the impact of
Web technology usage for SCM.
The study examined only a few of the environmental and organizational
variables that impact Web assimilation and diffusion. Several other factors,
such as the supply-chain structure, complexity of processes, IT infrastructure,
and the nature of the Web systems, could also influence Web assimilation and
diffusion. This is another area for future research.
Finally, the study used the adopters of Web systems as the unit of analysis.
It captured the measures and the relationships as viewed by the adopter/
initiator firms. A good extension of the study would be to have suppliers or
buyer–supplier dyads as the unit of analysis.
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C. RANGANATHAN (ranga@uic.edu) is an assistant professor in the Department of

Information and Decision Sciences at the University of Illinois at Chicago. He has a
doctorate from the Indian Institute of Management, Ahmedabad, and a master’s de-
gree from the Birla Institute of Technology and Science, Pilani, India, and has the best
doctoral dissertation award, the best teaching case award at the International Confer-
ence on Information Systems, and best paper awards from the Society for Information
Management. His research interests include e-business, information systems strate-
gies, and strategic issues pertaining to managing information systems. His work has
been published in Communications of the ACM, Decision Sciences, Information and Man-
agement, and Information Systems Management.
JASBIR S. DHALIWAL (dhaliwalj@nku.edu) is a professor chair of information sys-

tems management at the College of Business, Northern Kentucky University. He com-
pleted his Ph.D. in management information systems at the University of British
Columbia in Vancouver, and he has served on the academic faculties of the Norwe-
gian School of Management, the National University of Singapore, and the Technical
University of British Columbia. His publications have appeared in journals such as
Information and Management, Information Systems Research, Journal of Organizational Com-
puting and E-commerce, among others. His current research interests include technol-
ogy convergence in supply-chain management, intrapreneurship within the informa-

tion technology units of large corporations, and the design of intelligent explanation
systems.
THOMPSON S.H. TEO (bizteosh@nus.edu.sg) is Information Systems Area Coordi-

nator and associate professor in the Department of Decision Sciences at the NUS Busi-
ness School. His research interests include the strategic uses of information technology,
e-commerce, adoption and diffusion of information technology, and strategic infor-
mation technology management and planning. He has published more than 70 pa-
pers in international refereed journals, such as Communications of the ACM, Database,
Decision Sciences, Decision Support Systems, Information and Management, International
Journal of Electronic Commerce, and Journal of Management Information Systems. He is also
on the editorial board of Communications of AIS, European Journal of Information Sys-
tems, Journal of Information Technology Cases and Applications, Internet Research, Omega,
and the International Journal of Electronic Business.

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Assimilation and Diffusion of Web Technologies in Supply-Chain Management An Examination of Key Drivers and Performance Impacts

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Assimilation and Diffusion of Web Technologies in

Supply-Chain Management: An Examination of

KEY WORDS AND PHRASES: e-business, information technology value, supply-chain

business-to-business (B2B) SCM systems, especially in the areas of e-procure-

Theoretical Background and Research Model

Web Technologies and Extended Enterprise

Development of Research Model

The assimilation and diffusion of information technology in organizations has

Key drivers References

Supplier interdependence [16, 21, 44, 69, 75, 80]

Table 1. Key Drivers and References.

According to the resource-dependency perspective, organizations are depen-

Figure 1. Research Model

coercive power to influence suppliers to adopt EDI systems [44]. Persuasive

Competitive pressure is an important variable influencing the deployment

IT Activity Intensity in Industry

IT activity intensity refers to the extent to which a firm’s partners, suppliers,

Managerial IT knowledge refers to the union of IT-related and business-re-

The structural perspective on organizations maintains that structural mecha-

the functional business units of the organization [13]. Research on IT adop-

H6: Formalization of IT unit structure will be positively associated with

Assimilation and Diffusion of Web Technologies

Assimilation and diffusion are distinct, yet closely interrelated, constructs in

H7: Internal assimilation of Web technologies will be positively associated

Performance Impact of the Assimilation and Diffusion of Web Technologies

The performance impact of IT has generated considerable interest. Research-

Research Methodology and Data Analysis

Constructs and items Loading

Table 2. Measurement Model Loadings.

Method and Sample

Annual revenue level Frequency %

<1 million 1 0.60

Time elapsed since Web technology deployment Frequency %

<1 year 9 5.11

Title of respondent Frequency %

CIO/CTO/vice president for IS/senior vice president for IS 63 35.80

Table 3. Demographics of Responding Firms.

regrouped into seven industry categories in order to perform chi-square tests.

they differed across the industry representations, and no significant differ-

Composite Average variance

Supplier interdependence 0.70 0.77

Table 4. Reliability and Average Variance Extracted of Constructs.

Realized benefits 2.99 1.34 1.00

INTERNATIONAL JOURNAL OF ELECTRONIC COMMERCE

Supplier Competitive IT activity Managerial IT

Table 5. Descriptives and Intercorrelations.

Figure 2. PLS Structural Model

1 Supplier interdependence → Diffusion 0.134*

Table 6. Results of PLS Structural Model.

Discussion and Conclusions

Contributions to Research and Practice

2. It provides insights into real-world Web-SCM efforts, an area where

4. Organizations may want to adopt a two-pronged “internal assimila-

Limitations and Future Research

1. Agarwal, R., and Sambamurthy, V. Principles and models for organizing

Domains of IT Research: Projecting the Future Through the Past. Cincinnati:

24. Dyer, J.D. Collaborative Advantage: Winning Through Extended Enterprise

chain management. Industrial Marketing Management, 29 (winter 2000), 45–56.

organizational systems, Decision Sciences, 26, 3 (1995), 303–336.

evaluation: Does imitation transcend judgment? Journal of the AIS, 3 (2002),

C. RANGANATHAN (ranga@uic.edu) is an assistant professor in the Department of

JASBIR S. DHALIWAL (dhaliwalj@nku.edu) is a professor chair of information sys-