Identifying & Prioritizing of Electronic Commerce Factors in B2B Relationships using Fuzzy ANP (Case study: Nanotechnology High tech Organizations)

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1 Identifying & Prioritizing of Electronic Commerce Factors in B2B Relationships using Fuzzy ANP (Case study: Nanotechnology High tech Organizations) Zahra Javidian Department Of Engineering, Darab Branch, Islamic Azad University, Darab, Iran Reza Soltani Mollayaaghobi Kermanshah Science & Research Branch, Islamic Azad University, Kermanshah, Iran Abstract Business-to-business (B2B) commerce on the Internet entails the application of the Internet and related technologies for the exchange of products, services, information and payments between businesses. Advancements in the networking technology, the rapid growth of the Internet and the development of innovative Internet-based solutions allow traditional companies to move organizational processes online and conduct business electronically. This transformation enables firm to streamline business processes and the entire value chain, and provides the potential to obtain significant economic payoff. While sizable investments in e-commerce are being made, Information Systems (IS) researchers and practitioners are struggling to determine whether and how these expenditures improve the business performance of firms and how to measure e-commerce performance in the first place. This paper investigates and examines the key factors affecting Business-to-Business (B2B) e-commerce (EC) success. The factors were initially identified through a literature review that revealed several factors that could contribute to the superior or improved business performance and that ultimately led to B2B e-commerce success. These factors were empirically tested, analyzed, and evaluated for their importance using a survey in 7 high technology industries of Iranian nanotechnology firms. To have comprehensive results, we did an importance analysis to rank these factors using a fuzzy ANP method. The last but not lease, we suggest some new strategies to improve B2B relationship between firms using information systems. Keywords: Information Technology, Business 2 Business, Nanotechnology industry Introduction The use of information technology (IT) applications to support organizational and inter-organizational processes is not a new phenomenon. A large body of literature has investigated the adoption and implementation of IT, and the business value obtained by firms from such efforts (e.g., Cooper and Zmud 1990; Premkumar and Ramamurthy 199; Barua et al. 199). However, most of the studies in this research stream were conducted before the widespread growth and use of the Internet and Internet-based solutions. Because the Internet has significantly different technological and economic characteristics, the adoption and use of Internet-based applications provide opportunities and introduce challenges that firms did not encounter earlier. Due to limitations in the prior technologies, the existing research does not adequately address some of the theoretical and pragmatic issues involved in leveraging Internet-based solutions to obtain business value. Recognizing this, researchers have attempted to investigate the adoption and use of these solutions in firms, and the business value obtained from such efforts (e.g., Barua et al. 2001; Chatterjee et al COPY RIGHT 2012 Institute of Interdisciplinary Business Research 968

2 2002; Zhu and Kraemer 2002). This dissertation adds to this small but growing literature. One of the most distinguishing features of Internet-based solutions that enable B2B commerce online is their ability to support the exchange of rich information within the firm and across members of the value-chain. For instance, Internet-based procurement (IBP) applications enable firms to share technical specifications, engineering drawings, invoices and future forecasts both within the firm and with suppliers. In addition, IBP solutions support the entire procurement process by enabling online product and supplier search, negotiations, ordering, payment and settlement. It is evident that unlike other IT applications used in the past, Internet-based applications can be used in both informational and transactional activities. Firms may differ extensively in the use of the Internet, and different antecedents may determine the extent to which firms use the Internet in informational and transactional aspects. The first essay in this dissertation distinguishes between Internet use for informational and transactional activities, and develops a model to explain the differences in Internet use in firms to conduct B2B procurement. Firms can employ a variety of solutions to conduct B2B commerce on the Internet. These applications differ from one another on multiple dimensions, such as scope of activities, openness and potential impact on buyer-supplier relationships. The extent and determinants of adoption and use of these solutions are likely to differ considerably in firms. Thus, in the second essay in this dissertation, we focus on firm participation in Internet-based B2B public markets. Unlike consortia and private B2B markets, public markets allow all buyers and suppliers to participate in the electronic marketplace. In contrast to the lofty projections of firm participation and the resulting transaction volumes in public markets, the actual participation has been low. In the second essay, we examine how the unique characteristics of B2B public markets impact the planned firm participation in these markets in the future from both short-term and long-term points of view. Cunningham (2002) defined B2B e-commerce as transactions between internal business operations, such as marketing, sales, manufacturing, and support. From an application perspective, Gunasekaran, Marri, and McGaughey (2002) defined B2B e-commerce as a type of IT that electronically enables business transactions among various entities in order to satisfy an organizational objective. For the purpose of this study, the author adopted the definition of B2B e-commerce provided by Yu, Hsu, and Hsi (2002). Yu et al. (2002) defined B2B e-commerce as an enterprise conducting business with another enterprise over the Internet. It reflects that both sellers and buyers are business corporations. B2B e-commerce covers a broad range of applications that allows companies to form electronic relationships with their distributors, resellers, suppliers, and other partners. Today, the Internet technology allows B2B e-commerce users to link their companies to the digital markets with other companies easily and inexpensively. Literature review of B2B success Factors A review of the literature shows that several studies have been done on the success factors for ecommerce. Jutla et al. (1999); and Li and Li (200) have identified and analyzed the success factors for B2B e-marketplace. The functional factor, strategic factors, and technical factors are the three most critical elements for e-marketplace success. Functional factors include facilitation of product customization, support for negotiation (bidding / negotiation), and access to a similar interest user community. In addition, other key areas of value-add functions are domain expertise, life cycle support, logistic support, electronic payment services, integration capabilities, and data mining services. Strategy factors include first-to- COPY RIGHT 2012 Institute of Interdisciplinary Business Research 969

3 market, brand establishment, customer focus, targeted marketing, and outsourcing. Technical factors have direct consequences for the success of the e-marketplace. Technical issues encompass quality-of-service items such as response time, throughput, compatibility, and reliability. The framework presented by the Li and Li s (200) model is based on a theoretic perspective, due to lack of empirical testing, further testing is needed in order to validate its applicability. Furthermore, this model does not discuss external factors, which may be important to the success of e-marketplaces. A framework developed by Quaddus and Achjari (200) provided four exogenous factors (internal driver, internal impediment, external driver, and external impediment) that affect e-commerce success. The factors were classified depending on whether they were drivers or impediments of e-commerce success, and whether the impact was internal or external to the organization. The internal impact included benefits and impediments to the company using e-commerce such as cost leadership, reputation, market, and business entry. External impact consisted of both benefits and impediments to external parties such ascustomers and suppliers. External drivers included product pricing, time spent, convenience, and external relationships. Data were collected via a questionnaire-based survey using 24 observed variables. Their study results suggested that increased benefits (both internal and external) from the use of e-commerce significantly predict the perceived and/or expected success of e-commerce. Quaddus and Achjari s model did not discuss the strategic and technical factors, which are the areas of their weakness. Jennex, Amoroso, and Adelakun (2004) studied the key infrastructure factors affecting the success of small companies in developing countries that establishing B2B e-commerce ventures. Five main success factors were identified: people factors, technical infrastructure, client interface, business infrastructure, and regulatory interface. These factors were later evaluated for their importance through a questionnaire-based survey. Their study results indicated that workers skills, client interface, and technical infrastructure are the most important factors of the B2B e-commerce success. Jennex et al. s model focuses on the infrastructure factors only; however, other factors such as strategic and functional factors were not discussed. Lee and Kim (2007) developed a research model that has identified eight factors, comprising the characteristics of Internet-based information systems (IIS) technology innovation, organizational factors, and IS-related factors that affect the implementation success of IIS. The IS- related factors include IS infrastructure, IS expertise, and importance of IS security. The empirical test results of the Lee and Kim s model revealed that the compatibility of IIS and IS infrastructure are the key determinants on the extent of IIS implementation. The IS expertise potentially affected the extent of IIS implementation. Lee and Kim s model is based on the technology innovation theory and the authors do not discuss the strategy factors in their model. The previous research models that use various factors to assess e-commerce success were based on different perspectives. From business value perspective, Li and Li s (200) model identified the CSF for B2B e-marketplaces. The weakness of their model was a lack of empirical testing and missing external factors. The Quaddus and Achjari s (200) model was based on the organizational impact to determine the success drivers and their impediments. The weakness of this model was that both strategic and technical factors were not discussed. The Jennex et al. s (2004) model was based on e-commerce infrastructure requirements and their model focuses on the infrastructure factors, other factors such as strategic and functional factors were not considered. Finally, Lee and Kim s model was based on technology innovation theory. The weakness of their model was its lack of focus on strategic factors. This study used the business performance measurement approach to COPY RIGHT 2012 Institute of Interdisciplinary Business Research 970

4 measure e-commerce success (Venkatraman & Ramanujan, 1986). Based on Li and Li s (200) B2B CSFs model, this study adopted their concepts of functional, strategic, and technical factors for measuring e-commerce success. In addition, the concept of an external factor was also adopted from Quaddus and Achjari s (200) model. Therefore, a new proposed conceptual model to assess B2B e-commerce success was framed with four categories of factors, which included functional, strategic, technical, and external factors, because previous e- commerce success models were based on different perspectives. Therefore, a few independent variables from each model are found in common. Huang et al. (200) argued that e- commerce performance drivers may influence the operational excellence measures, while the operational excellence measures may further influence the financial measures. From the literature review, the author selected several factors that significantly impact business performance that ultimately leads to a B2B e-commerce success. Initially, the following seven independent variables were identified for the proposed research model. They were (a) internal application integration (Functional factor), (b) External B2B application integration (Functional factor), (c) alignment of business and e-commerce strategy (Strategic factor), (d) alignment of business and IT strategy (Strategic factor), (e) IT infrastructure (Technical factor), (f) B2B partner relationships (external factor), and (g) inter organization collaboration (external factor). Research methodology & Fuzzy ANP The ANP, also introduced by Saaty, is a generalization of the AHP (Saaty, 1996). Whereas AHP represents a framework with a uni-directional hierarchical AHP relationship, ANP allows for com-plex interrelationships among decision levels and attributes. The ANP feedback approach replaces hierarchies with networks in which the relationships between levels are not easily represented as higher or lower, dominant or subordinate, direct or indirect (Meade & Sarkis, 1999). For instance, not only does the importance of the criteria determine the importance of the alternatives, as in a hierarchy, but also the importance of the alternatives may have impact on the importance of the criteria (Saaty, 1996). Therefore, a hierarchical structure with a linear top-to-bottom form is not suitable for a complex system. Our sample was contains 13 experts in 7 high technology industries of Iranian nanotechnology firms that answered study questionnaire. Figure 1: Five dimensions of E-commerce success factors in B2B relationships COPY RIGHT 2012 Institute of Interdisciplinary Business Research 971

5 Success factors Business/IT alignment Table 1: Fuzzy Judgment matrix Inter organization Collaboration B2B partner relationship IT infrastructure Enterprise electronic alliance Business/IT alignment Inter organization Collaboration B2B partner relationship IT infrastructure Enterprise electronic alliance 0.87, 1.17) (0.6, 1.21, 1.68) (0.87, 1.78, 2.38) (1.3, 2.22, 2.96) (1.63, 1.38, 1.8) (1.02, 1.14, 1.48) (0.88, 1., 2.28) (1.06, 2.37, 3.13) (1.79, 3.08, 4.11) (2.3, 2.08, 2.96) (1.48, 0.92, 1.22) (0.96, 1.02, 1.37) (0.7, 2.0, 2.81) (1.43, 2.11, 2.76) (1.8, 1.04, 1.43) (0.76, 0.9, 1.26) (0.7, 0.91, 1.24) (0.67, 2.13, 2.8) (1.7, 2.23, 3.04) (1.61, 1.27, 1.86) (0.86,.26, 0.32) (.22, 0.29, 0.38) (0.23, 0.7, 0.7) (0.46, 0.64, 0.78) (0.2, 0.36, 0.48) (0.28, Success factors i 1 j = 1 m a kj 1 Table 2: Fuzzy weights of five dimensions j = 1 l s a kj s, m { l, m u} u w s k l = j = 1 a j m i 1 = s kj a m kj 1 1 u Dimensions weights 0.13, 0.16) (0.1, 0.1, 0.2) (0.11, 0.27, 0.3) (0.2, 0.31, 0.4) (0.23, 0.18, 0.2) (0.13, COPY RIGHT 2012 Institute of Interdisciplinary Business Research 972

6 Table 3: Relative and logical weights Relative Logical weights weights Dimension Business/IT alignment Inter organization Collaboration B2B partner relationship IT infrastructure Enterprise electronic alliance Conclusion This study used the business performance measurement approach to measure e-commerce success (Venkatraman & Ramanujan, 1986). Based on Li and Li s (200) B2B CSF s model, this study adopted their concepts of functional, strategic, and technical factors for measuring e-commerce success. In addition, the concept of an external factor was also adopted from Quaddus and Achjari s (200) model. Therefore, a new proposed conceptual model to assess B2B e-commerce success was framed with four categories of factors that included functional, strategic, technical, and external factors, because previous e-commerce success models were based on different perspectives. From the literature review, the researcher selected several factors that significantly impact business performance, ultimately leading to B2B e-commerce success. Initially, the following seven independent variables were identified for the proposed research model. They were (a) internal organization collaboration, (b) B2B partner relationship, (c) business/it alignment, (d) IT infrastructure (f) enterprise electronic alliance. A proposed research model was developed to test the relationships between the variables. The measuring objectives were to assess the level of data, functions, and application systems integration for both internally within the firm and COPY RIGHT 2012 Institute of Interdisciplinary Business Research 973

7 externally between the business partners, measuring how well cross-functional processes are being supported. Strategic factors include the alignment of business and e-commerce strategy and the alignment of business and IT strategy. The measure was based on how alignments would impact business performance improvement. The technical factors included IT infrastructure and how significantly IT Infrastructure would support business operations. External factors included accessing B2B partner relationships among the business partners and inter organizations collaborative performance among buyers and suppliers. Finally, a company s performance can be measured by financial performance indicators such as growth of sales and market shares. Nonfinancial performance indicators including, improved productivity, improved quality service, better customer relationships, improved operation effectiveness and efficiency, better partner relationships, and streamline internal business processes. The model proposed in the scope of this study was related with a production business; however, it can also be adapted to different businesses. COPY RIGHT 2012 Institute of Interdisciplinary Business Research 974

8 References Chatterjee, D., Grewal, R., and Sambamurthy, V. Shaping Up for E-Commerce: Institutional Enablers of the Organizational Assimilation of Web Technologies, MIS Quarterly (26:2), June 2002, pp Cooper, R. B., and Zmud, R. W. Information Technology Implementation Research: A Technological Diffusion Approach, Management Science (36:2), 1990, pp Cunningham, M. (2002). How to build a profitable E-commerce strategy. Cambridge, MA: Perseus. Barua, A., Kriebel, C. H., and Mukhopadhyay, T. Information Technologies and Business Value: An Analytical and Empirical Investigation, Information Systems Research (6:1), 199, pp Barua, A., Konana, P., Whinston, A. B., and Yin, F. Managing E-business Transformation: Opportunities and Value Assessment, Sloan Management Review (43:1), 2001, pp Gunasekaran, A., Marri, R. E., McGaughey, F., & Nebhwani, M.D. (2002). Business-to-business electronic commerce. International Journal of Production Economics, 7, Huang, J., Wang, H., & Zhao, C. (200). E-commerce success factors: Exploratory and empirical research on the Chinese publishing industry. Proceedings of 200 IEEE International Conference on e-business Engineering (ICEBE 0). Jennex, M. E., Amoroso, D., & Adelakun, O. (2004). E-commerce infrastructure success factors for small companies in developing economies. Electronic Commerce Research, 4, Jutla, D., Bodorik, P., & Wang, Y. (1999). Developing Internet e-commerce benchmarks. Information Systems, 1, Lee, S., & Kim, K. J. (2007). Factors affecting the implementation success of Internet-based information systems. Computer in Human Behavior, 23, Li, J., & Li, L. (200). On the critical success factors for B2B E-marketplace. Proceedings of the 7th International Conference on Electronic Commerce, China, Meade, L. M., & Sarkis, J. (1999). Analyzing organizational project alternatives foragile manufacturing processes: An analytical network approach. InternationalJournal of Production Research, 37, Premkumar, G., Ramamurthy, K., and Nilakanta, S. Implementation of Electronic Data Interchange: An Innovation Diffusion Perspective, Journal of Management Information Systems, (11:2), Fall 1994, pp Quaddus, M., & Achjari, D. (200). A model of electronic commerce success. Telecommunications Policy, 29(2-3), Saaty, T. L. (1996). Decision making with dependence and feedback: The analyticnetwork process. Pittsburgh: RWS Publications. Venkatraman, N., & Ramanujam, V. (1986). Measurement of business performance in strategy research: A comparison of approaches. The Academy of Management Review, 11, Yu, H. C., Hsu, C. S., & Hsi, K. H. (2002). Setting up an e-marketplace: a three-stage approach. Technology in Society, 24, Zhu, K., and Kraemer, K. e-commerce Metrics for Net-Enhanced Organizations: Assessing the Value of e-commerce to Firm Performance in the Manufacturing Sector, Information Systems Research (13:3), September 2002, pp COPY RIGHT 2012 Institute of Interdisciplinary Business Research 97