Key supplier involvement in IT-enabled operations: When does it lead to improved performance?

Abstract

As firms continue to invest in IT resources and collaborate with key suppliers, many fail to benefit from these activities. Drawing on resource orchestration theory and the relational view of interfirm competitive advantage, we examine the contingent relationships among IT resources, key supplier involvement, and the focal firm's performance. Using a multi-informants dataset from the manufacturing sector in China, we find that supplier involvement mediates the positive effect of IT resources on the focal firm's performance only when there is a high level of mutual trust and when competitive intensity is low in the focal firm's environment. In a highly competitive environment, however, mutual trust dampens the positive effect of supplier involvement on the focal firm's performance, which reveals the "hidden costs" of interfirm trust. In contrast, the direct positive effect of IT resources on the focal firm's performance is amplified by mutual trust when competitive intensity is high, suggesting that the focal firm will fare better without supplier involvement under these conditions. Therefore, key supplier involvement in the focal firm's IT-enabled operations does not always lead to improved performance and its effect on performance is contingent on relational and environmental variables.

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