The nexus of information
technology, trust and
performance within inter-firm
collaborations
By
Inge de Groot
University of Groningen Faculty of Economics and Business
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ABSTRACT
The rising growth of inter-firm collaborations is accompanied by a high failure rate. To maximize the performance of the collaborations, an effective organization of resources is necessary. Existing literature stresses the importance of control and trust in the rise of performance. This research focusses on one form of control: information technology, and how this is related with performance. Literature hypothesized trust mediates this relationship. The main findings of this research, gathered by means of a survey, show a positive effect of ability and integrity trust on performance. Also an enabling information technology system positively influences performance.
Key words: control, information technology, trust, firm performance Supervisor: Abdul Rehman Abbasi
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TABLE OF CONTENT
1. Introduction 3
1.1 Research question 4
2. Literature Review 5
2.1 Inter-firm collaborations and firm performance 5
2.2 Control 8
2.2.1 Information Technology & Performance 10
2.3 Trust 12
2.3.1 Information Technology, Trust & Firm performance 13
2.5 Alternative explanations 15 2.6 Conceptual model 17 3. Methodology 18 3.1 Research type 18 3.2 Sample selection 19 3.3 Data collection 19 3.4 Measurement 20 3.5 Analysis 22 4. Results 23 5. Discussion 32 6. Conclusion 36
6.1 Limitations and future research 37
6.2 Theoretical and managerial implications Research type 38
References 40
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1. INTRODUCTION
Inter-firm collaborations are increasingly important for companies, which can provide competitive advantages in order to survive in a rapid changing environment (Barney, 1991). Partners in such collaborations are highly dependent of each other, for which partners seek a level of confidence in each other. Confidence exists of two sources; control and trust (Das & Teng, 2001). The organization of control and trust is a challenging notion for managers in order to increase the firm performance.
Due to different technological and political factors the economy has changed. In order to decrease the high failure rate of inter-firm collaborations, the organization of control can provide a solution. However, control mechanisms failed while coping with the economic changes (Jensen, 1993). Control mechanisms are used to reduce the risks of a collaboration (Coletti, Sedatole & Towry, 2005). These risks can refer to opportunistic behavior of a partner when the incentives and goals are not aligned. The effect of control on performance is investigated broadly (Coletti et al., 2005; Inkpen & Currall, 2004; Nicolaou, Sedatole & Lankton, 2011; Sanders & Premus, 2005). Trust is the second source of confidence, which is highly intertwined with control (Das & Teng, 2001). Despite a mature literature field, contradicting views remain with respect to how trust and control are related (Coletti et al., 2005; Das & Teng, 1998; Ouchi, 1979; Vélez et al., 2008).
Firm performance can be increased by reducing costs, as stated by the transaction cost theory (Jarillo, 1988). Also, performance is increased by terms of organizational learning, an undervalued concept (Sako, 1997). This research focusses on information technology as a form of formal control mechanism. The use of information technology has increased over time and the capability of these systems has also changed (Sanders & Premus, 2005), and therefore becoming an increasing important control mechanism. Information technology enables partners to share information, an important aspect for the creation and retention of trust in collaborations (Tomkins, 2001). This research follows the study of Nicolaou et al. (2011) who stated the characteristics of IT determines the effect on trust which in return effects performance.
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al. (2011). This research extends trust into a three-dimensional examination, as opposed to one-dimensional. The dimensions of trust exists of; ability, benevolence and integrity (Mayer, Davis & Schoorman, 1995). By finding clear evidence for these relations, this research provides information about the enablers for successful inter-organizational collaborations.
From a managerial perspective this study provides information about the organization of control and trust, in order to increase the performance within inter-firm collaborations. The focus lies on the technical/industrial sector. This sector is subjected to a rising emphasis on inter-firm collaborations in order to coop with their fast changing environment (Bougrain and Haudeville, 2002). From a theoretical perspective this research contributes to the existing literature of Nicolaou et al. (2011), who stated the influence of information technology on performance is mediated by trust. This research conducts a more comprehensive examination by separating trust into the three dimensions. Existing research lacks of empirical studies examining all the dimensions of trust and how they mediate the relation between information technology and performance. In addition and following Sako (1992) performance is defined not only based on the transaction cost theory, but also includes organizational learning.
1.1 Research question
The research question is stated as follows: “What is the relationship between information
technology, trust and firm performance within industrial inter-firm collaborations?”. Here, the
relationship refers to whether information technology increases firm performance and whether this relationship is only direct or also indirect mediated by the trust dimensions.
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section consists of the conclusion regarding the research question, the implications and the research limitations driving future research.
2. LITERATURE REVIEW
This chapter starts with the context of the research, inter-firm collaborations and the desired performance. To increase this firm performance an inter-firm relationship can contribute. However this relationship has to be controlled in order to achieve the performance. A key topic of existing literature, which is highly intertwined in collaborations and control, is trust. Trust is therefore also taking into account when controlling for performance. The inter-relations between performance, control and trust form the bases for the conceptual research model at the end of this chapter.
2.1 Inter-firm collaborations and firm performance
The performance of an inter-firm collaboration can increase due to the formation of a collaboration (Carr & Pearson, 1999; Corsten & Felde, 2005; Dyer, 1997; Nicolaou et al., 2011). Therefore, in a state of a growing competitive market, creating collaborations is seen as an important business motion in de last decade. Partners of a collaboration are seeking for opportunities outside their own ability and expertise (Coletti et al., 2005; Kanter, 1994). Meaning, because a company does not possess the desired ability or expertise, a collaboration with a partner who does can create competitive advantages in relation to the company’s competitors.
This paper defines collaboration as follows: “two (or more) parties are involved in some type of joint production, such that each party’s individual output cannot directly be observed” (Coletti et al. 2005: 480). This definition captures the idea of not having the possibility to directly observe the activities of the other, implying a need to control in order to still meet the performance targeted. Although different forms of collaborations exist, e.g. horizontal and vertical, it is not the aim of this research to distinguish between these forms. By using the above definition, no restrictions are put on the type of collaborations and a need for control is implied.
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understanding and no specific definition is found. However multiple theories exist trying to explain the benefits of a collaboration. This paragraph follows with theories explaining the rationales for collaboration.
Rationales for collaboration
The transaction cost economics theory (TCE) of Williamson (1975) is one motive, characterized by the self-interest and the minimization of costs. Transaction costs is defined as: “the cost of running a relationship and include the costs associated with negotiating, implementing, coordinating, monitoring, adjusting, enforcing and terminating exchange agreements” (Frazier, Spekman & O’Neal, 1988: 65). It focuses on the efficient structuring of activities in order to reduce transaction costs (Barney, 1991; Barringer & Harrison, 2000; Corsten & Felde, 2005; Das & Teng, 1998; Jarillo, 1988; Sako, 1997).
Another rational is the resource based-theory implies the potential of value creation when resources are jointed (Barringer & Harrison, 2000; Coletti et al., 2005; Das & Teng, 2000; Kanter, 1994). Instead of searching for a strategic fit of the company within the environment, the resource based view implies: “what a firm possesses would determine what it accomplishes” (Das & Teng, 2001: 32). Meaning if a firm does not possess the resources desired, a collaboration could provide an answer for filling the resource need. Thus creating value with the help of the partner’s resources.
A different theory concerns the rational for organizational learning (Kogut, 1988; Corsten & Felde, 2005; Lyles & Salk, 1996; Sabel, 1993; Sako, 1997; Selnes & Sallis, 2003). The learning theory captures the process of gathering knowledge, learning and adaptation. Knowledge is acquired by exchanging information and sharing experiences (Lyles & Salk, 1996). The mentioned components are possible benefits of a collaboration.
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Because these are the main rationales, it implies these are also the main performance objectives of collaborations. Because this research does not put any restrictions on the form of collaboration it seems most appropriate to include multiple theories as possible outcomes. Accordingly, the transaction cost economics theory seems appropriate as it is often used in examining the performance of collaboration. Secondly, the learning aspect seems appropriate as it receives a rising importance in existing literature. And finally, the resource based-theory seems appropriate to include as a performance outcome for which it can captures a broad view of tangible and intangible resources. However, within the scope of this research the institutional theory will not be considered. Rationale is that the increase in reputation is measured by the environment and not internally by the company. Concluding, in this research performance is defined as value creation due to an increase in learning, a decrease in transactions costs and an efficient organization of resources.
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2.2 Control
As mentioned, the measurement of the individual performance within a collaboration is difficult (Coletti, 1005). This creates a possibility for behaving opportunistically. With control mechanisms the individual contribution is made more transparent, which decreases the possibility for opportunistic behavior. This reduction also appears to be in the following definition: “the various policies and procedures that firms use to mitigate different types of risk” (Coletti et al., 2005: 480). The definition implies control can decrease the risks involved with collaborations. However it does not specify the risks, nor does it include firm performance. A second and better definition of control is: “Control in the joint venture context refers to the process by which partners’ firms influence a joint venture entity to behave in a manner that achieves partner objectives and satisfactory performance” (Inkpen & Currall, 2004: 588). This definition states control can influence the behavior of the partner and thus decreases the risk a partner will only act in their own interest. In addition this definition also includes the main objective of forming a collaboration, the performance. In which control can support the achievement of performance objectives. Because this definition includes both the influence of control and the performance, the definition is most appropriate in this research.
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Information technology
Information technology (IT) is considered to be a rising important factor for collaborative relationships (Chae, Yen & Sheu, 2005; Nicolaou et al., 2011; Sanders & Premus, 2005). And therefore an interesting subject to examine within the context of collaboration. This research defines IT as follows: “Technology-enabled systems that facilitate data creation, storage, transformation, and transmission between transacting partners” (Nicolaou et al., 2011: 1020). The definition shows the capability to control. Because with this system information can be transmitted and therefore specific behavior can be specified for the partner. The definition shows the abilities of the system, which is important in understanding the effect on performance. Before analyzing the effect on performance, a dichotomy is found within the use of IT. In order to understand these two different usages, it is important to understand the categorization of control as a whole. The first partition is made between formal and informal control (Smith et al., 1995) (Dekker, 2004). Formal control mechanisms concerns: “contractual obligations and formal organizational mechanism for cooperation and can be subdivided into outcome and behavior control” (Dekker, 2004: 31). On the other hand informal control mechanisms include: “informal cultures and systems influencing members and is essentially based on mechanisms inducing self-regulation” (Dekker, 2004: 31). Concluding, where formal control is carried out by rules and procedures and involve information transfers (Inkpen & Currall, 2004), informal control is based on culture and the internalization of firm values. When these control mechanisms are used in collaborations, they are used to influence the behavior of the partner and reduce opportunistic behavior (Coletti et al, 2005; Dekker, 2004; Inkpen & Currall, 2004; Vosselman & van der Meer-Kooistra, 2009). Information technology is used to influences the way of cooperation and involves information sharing, therefore information technology is a formal control mechanisms.
Enabling and controlling use of IT
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information shared by IT can be used to control the activities, or can be used to enable decision making.
When the information is used to coordinate decision making, this research speaks of an enabling use of IT. It is defined as: “information is used as a means of planning and coordinating the interdependent activities in which the parties collectively engage” (Nicolaou et al., 2011: 1022). The definition implies the partners feel facilitated and motivated by the system. The information provided is thus ex ante, to support decision making and learning. In comparison with the distinction of Ouchi (1979), an enabling characteristic can be seen as a form of behavioral control. Therefore it can be said, the enabling use of information coordinates the process of decision making which is appropriate for the collaboration.
On the contrast, a controlling function is carried out when “information is used for verifying and evaluating the actions of the partner and as the basis for incentives to alliance partners to achieve desirable or predetermined outcomes” (Nicolaou et al., 2011: 1022). Meaning, a controlling use of the system can monitor and evaluate the activities of the partner. This way, the system provides information about the activities done. In comparison with Ouchi (1979), this use can be seen as a form of outcome control, because it is used ex post to evaluate the activities.
2.2.1 Information Technology & Performance
The effect of IT on performance is frequently examined, however most studies disregard the distinction of IT usages or neglect organizational learning as a performance component. This research does. Existing and limited research show a positive effect of IT on performance ((Beamish, 1988; Nicolaou et al., 2011; Sanders & Premus, 2005; Sohn, 1994; Subramani, 2004, Stump & Sriram, 1997).
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achievement of the desired firm performance is increased by influencing the partner by either specifying the planning or coordination or by evaluating the activities and adjusting based on the evaluation. Meaning, the company can influence the activities in order to reach their own objectives. In addition, organizational learning is included as a performance outcome which can only be achieved whether there is a form of information sharing present, because IT facilitates this it increases the possibility to learn from each other.
However, although it is said control can reduce opportunistic behavior, a partner can still distort the information system (Birnberg, Turopolec & Young, 1983). This distortion can be done by smoothing, biasing, focusing, gaming, filtering or by illegal acts. All concerns changing or placing the focus on the information in their own interest. These distortion can occur within inter-firm collaborations. These distortions are even more difficult to unthread due to the physical and physical distance of the companies involved. The consequence of these distortions is a negative effect on the firm performance.
In this research firm performance is seen from one perspective, here called the firm. Because information is used to coordinate ex ante, no incentives exist from the partner to distort the information because it is about receiving information, not giving information. The use of enabling IT facilitates decision making, specifies desired objectives and information exchange. Consequently, it increases organizational learning and reduces the costs by increasing the efficiency of the collaboration. Thus the use of enabling IT is assumed to increase the performance within an inter-firm collaboration.
Hypothesis 1 (H1) The degree of enabling IT usage increases the level of firm performance.
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effect performance positively due to it facilitates transparence, information sharing and evaluation. Therefore:
Hypothesis 2 (H2) The degree of controlling IT usage increases the level of performance. 2.3 Trust
The performance outcomes of a collaboration are enhanced by confidence (Compte & Postlewaite, 2004). Confidence is “a firm’s perceived certainty about satisfactory partner cooperation” (Das and Teng 1998; 492). Confidence is not only achieved by executing control, but is also achieved by trust (Das & Teng, 1998; Ring and Van de Ven, 1992). Trust is highly intertwined with control and plays an important role within inter-firm collaborations. The role of trust is highly debated (Das & Teng, 1998; Dekker, 2004; Tomkins, 2001; Sako, 1992; Van der Meer-Kooistra & Vosselman, 2000).
Trustworthiness is defined as: “An innate personal characteristic reflecting one’s preference for upholding some social norm of behavior, regardless of economic incentives” (Coletti et al., 2005: 481). Important is the distinction with trust, which is the perception of the trustor about the trustworthiness of the trustee. This research is concerned with trust as which it is concerned with the perception of the firm about the trustworthiness of the partner. Trust is also claimed to be the willingness of accepting vulnerability (Vosselman & Meer-Kooistra, 2009). Vulnerability is again linked with the interdependency of the partners (Mayer et al., 1995). Mayer et al. defined trust as: “The willingness of a party to be vulnerable to the action of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party” (1995: 712). This definition is most appropriate as it captures the expectations of the company referring to the desired firm performance, which is highly important in this research. It also defines trust as an independent of control.
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principles of the trustor. A similar categorization is made by Sako (1992) including; competence-based, goodwill-based trust and contract-based. This research follows the categorization of Mayer et al. (1995) because it encompasses competence as ability trust, goodwill as benevolence trust and contract trust can be seen as a form of competence trust.
Because trust is highly intertwined with control and no consensus exist about the relationship between control and trust, the effect of IT on performance is influenced by the trust present in the collaborations.
2.3.1 Information Technology, Trust & Firm performance
The role of trust has been examined widely in the context of economic exchanges, however it is difficult to examine the effect of trust on performance for which it combines the individual level of trust on the organizational level of firm performance (Zaheer, McEvily & Perrone, 1998; Barney, 1991). In addition, existing empirical research does not recognize all the individual trust expectations, therefore a gap exist in the literature regarding the individual influence of trust expectations within the relationship of IT and performance.
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As Vosselman & van der Meer-Kooistra (2009) stated, trust is necessary, but it is not sufficient. This brings us back to the control component of the exchanging relationship. Existing literature is contradicting about the relationship between control and trust, therefore also different perspectives exist regarding IT and trust (Aulakh, Kotabe & Sahay, 1996; Das & Teng, 2001; Ouchi, 1979; Tomkins, 2001;
Das & Teng (2001) stated the form of control determines the effect on trust. As mentioned earlier, control can be formal and informal. Informal control influences the belief system for which mutual norms and values are important, this form enhances trust. Formal control, under which IT belongs, diminishes trust. This negative effect rises because formal control specifies the preferred outcome or behavior (Das & Teng, 2001; Tomkins, 2001; Vlosky, Wilson & Vlosky, 1997). Concluding, by implementing formal control no trust is placed on the ability, benevolence or integrity of the partner.
A different view states trust grows because control mechanisms cause cooperation. Due to cooperation, partners have the opportunity to develop inter-relational trustworthiness (Coletti et al., 2005). Adding to this view Vélez et al. (2008) propose not only personal control, but also result and action control can enable trust. Sharing information also enhances trust (Chi, Holsapple, and Srinivasan, 2007; Vélez et al., 2008; Wang and Wei, 2007). IT has the capability of transmitting information, therefore creating transparency and aligning the motives.
Following the first perspective one might expect a decrease of trust due to the use of IT. However, this research makes a distinction between enabling use of information and controlling use of information. Within the enabling use of IT, information is used ex ante to coordinate planning. Although it can be seen as a form of behavioral control, this research argues that using information to provide coordination still contains a degree of freedom. Meaning the company has still trust in the ability, the benevolence and the integrity of the partner. Therefore, a positive effect is pronounced on trust with the use of enabling IT.
Hypothesis 3a (H3a) The relation between the degree of enabling IT usage and the level of performance is mediated by the intensity of ability trust.
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Hypothesis 3c (H3c) The relation between the degree of enabling IT usage and the level of performance is mediated by the intensity of integrity trust.
More specifically, this research pronounces an increase in trust with the use of enabling IT which in return increases the firm performance. Because this research defines two functions of IT, the controlling use of information may have a different effect on trust.
Because the characteristic of enabling use differ from controlling use, the effect on trust also differs. Where information is used to enable partners a degree of freedom is given, however with using information ex post in order to monitor and evaluate the activities of the partner no freedom is given. The concept of ex post information is also argued by Van der Meer-Kooistra & Vosselman (2000). Stating trust is already present before entering a collaboration, for example: a degree of the partner’s ability is expected otherwise a collaboration would be established with a different partner. When information is used ex post, ability trust will decrease. Because the activities are verified so any unsuitable actions can be punished and adjusted where necessary, a grow of trust in ability, benevolence and integrity is given no space and will decrease. Therefore a negative effect is pronounced between the use of IT for controlling intensions and trust.
Hypothesis 4a (H4a) The relation between the degree of controlling IT usage and the level of performance is mediated by the intensity of ability trust. Hypothesis 4b (H4b) The degree of controlling IT usage affects the level of performance
mediated by the intensity of benevolence trust.
Hypothesis 4c (H4c) The degree of controlling IT usage affects the level of performance mediated by the intensity of integrity trust.
More specifically, the use of controlling IT decreases trust, which in turn increases firm performance.
2.5 Alternative explanations
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The first concept which is of influence is trust propensity, which affects the degree of trust (Mayer et al. 1995). Mayer et al. proposed the following: “Trust for a trustee will be a function of the trustee's perceived ability, benevolence, and integrity and of the trustor's propensity to trust” (1995: 720). Meaning the effect of ability, benevolence and integrity on trust is moderated by the willingness or the tendency to trust. This tendency is ‘trust propensity’. Which only exists before any data is being gathered about the partner (Mayer et al. 1995). Propensity can be seen as a general characteristic of the trustor and is influenced by personal experiences and culture (Hofstede, 1980). Meaning, the results of trust measurements can differ due to the personal trust propensities, which in return can affect the overall relationship with performance.
Second, the length of relationship is found to be an important characteristic of collaborations (Tomkins, 2001; Vélez et al., 2008). The duration of the relationship influences the need for information and a possible rise of distrust. In addition, Mayer et al. (1995) argued the influences of time on trust expectations. Integrity trust is most notable in the earlier stages of the collaboration. Also, as the relationship develops, trust evolves due to interaction. Hence, this research controls for the length of the relationship.
The company’s experience of the sector can influence the degree of trust and performance (Hofstede, 1980; Şengün & Wasti, 2007). The more experienced the company is, the better the company can judge a partner and the better the company can coop with uncertainty. These effects influence the performance. The experience can also influence the perception of the information received or the information needed (Selnes & Sallis, 2003). Implying the use of IT may differ due to experiences of a company or with the experience the company has with the partner.
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2.6 Conceptual model
The relationship argued are fallen together with one representation, the conceptual model is shown in figure 2.1.
Hypotheses 1 and 2 relates to the two ways of using the information, both lead to an increase in the level of performance due to the decrease of transaction costs and the increase in organizational learning. Hypothesis 3 pronounced a relationship of IT on performance, mediated by trust. In which the use of information for enabling purposes increases all three trust dimensions, because partners are giving a degree of freedom. On the contrary, the use of information for controlling purposes decreases the level of trust because no degree of freedom is given at the partner when evaluating and controlling the activities. This relationship is captured in hypothesis 4, pronouncing a mediating effect between the use of controlling IT and firm performance. A note: the relationships of the three sub hypotheses of hypothesis 3 are all covered
Perceived trustworthiness
Intensity of integrity trust Intensity of benevolence trust
Intensity of ability trust Degree of enabling IT usage
Degree of controlling IT usage
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within 1 line in the model. This in order to retain a clear overview. The same holds for the sub hypotheses of hypothesis 4.
3. METHODOLOGY
This chapter contains justification for the research method used in order to find answers for the research question. The research question was stated as: “What is the relationship between
information technology, trust and firm performance within industrial inter-firm collaborations?”.
3.1 Research type
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3.2 Sample selection
This research focusses on collaborations within the technical/industrial sector. Rational for this sector is the strong movement to inter-firm collaborations (Fusfeld, 1986), in addition it attaches great importance on a qualified partner. Their rising number of collaborations is due to their rapidly changing environment, and for which solely companies are not capable enough to adopt new technology quickly enough in order to stay competitive. As Bougrain and Haudeville stated: “the technical environment within which firms operate has been transformed. Technology has become so complex that it cannot be handled by individual corporations” (2002: 735). In addition this sector aims for the same performance objectives stressed in this paper, the learning objective and the transaction cost theory. Also, the information aspect within this sector is of great difficulty transfer due to the complexity of the content. And finally, innovation is one of the main rational for establishing a collaboration (Bougrain and Haudeville, 2002). Concluding, this sector is characterized by their collaborations established to coop with the high risks of their environment, the complexity of information and the goal to reduce costs and increase innovation. Therefore this sector is highly appropriate for this research.
A large business association called FME, with approximately 2,400 registered companies, is used to gather data. This association is used as an access gate because all their members are active within engineering, trade, industrial automation and maintenance. However, using the FME association, a probability sample is not truly the case. Meaning not every company within the technical/industrial sector has the same probability of selection, because the company must be a registered with the FME association. The survey was addressed to an employee with an active involvement with an inter-firm collaboration. Functions differed from, CEO and owners to operational and project managers.
3.3 Data collection
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refer in your answers to one of these relationships” this statement clarified no restrictions were imposed. After one week a reminder by email was send. This email included a link to the survey online. A reminder effectively improves the response rate (Kasunic, 2005). A combination of post and web surveys was chosen, due to their capability of raising the response rate (Kaplowitz, Hadlock & Levine, 2004). In total 1617 companies were approached, of which 85 responded. These numbers lead to a response rate of 5,2%.
3.4 Measurement
The survey involves a total of six constructs and four control variables. This paragraph justifies the variables used in the survey.
Performance. The dependent construct are the performance outcomes of a collaboration. This
research examines performance by using measures of Selnes & Sallis (2003) and Lyles & Salk (1996). The construct concern measures for organizational learning and objective outcomes respectively. The survey uses a seven-point Likert scale for all four constructs. A scale widely used in questionnaires to specify the intensity of a belief (Kasunic, 2005). Because all constructs refer to a belief of the respondent, the Likert scale is highly suitable in this survey.
Information technology. Information technology is divided into two constructs: enabling and
controlling IT usage. All measures for IT are derived from the research of Nicolaou et al. (2011). These variables are earlier used in a context of inter-firm collaborations within the public industry. The goal was to identify the effect of information technology on risk and profitability. This research follows the same definition of information technology to identify the effect on knowledge and objective outcomes. Again these variables are measured with a seven-point Likert scale to identify their belief on performance outcomes. Although the objective measures may not all refer to a belief, a seven-point Likert scale is used in order to compare the results.
Trust. This research aims to find a more comprehensive representation of the relationships with
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Control variables. The first control variable refers to trust propensity. Trust propensity is
measured using questions derived from Mayer & Davis (1999) with a seven-point Likert scale. The length of relationship is measured by asking for the date of establishing the collaboration. Experience of the company is measured by asking the length of time the company has been active in the sector. And the last control variable includes a question referring to the number of employees. Except for the propensity variable, the control variables are not deducted from existing literature. The questions have an objective nature and refer directly to the answers needed, for which no Likert scale is necessary. All measures used can be found in the appendix.
Quality criteria
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IV DV
IV MV
MV DV
Reasoning from this point of view, with at most 6 variables used within one regression analysis, a response of 85 is sufficient. However, because multiple different theories suggest a higher response rate, it is necessary to critically take the response rate into consideration when speaking of generalization.
3.5 Analysis
The analysis consists of several steps. The execution is done with the help of SPSS. Because most variables are derived from existing literature, an exploratory factor analysis is performed. This shows the variability of the measures in a construct. In order to address the suitability for factor analysis, two tests are conducted. These tests include the Kaiser-Meyer-Olkin Measure of Sampling Adequacy (KMO) and Bartlett's Test of Sphericity (Williams, Onsman & Brown, 2010). According to Williams et al. (2010) a construct is regarded suitable with a KMO index of >0,50 and a significant value (p<0,50) for the Bartlett’s test. The factor analysis follows. A construct is made with the remaining variables. The Cronbach alpha measures the internal consistency of the remaining items for each construct. The alpha is an estimation of reliability and should exceed 0,70 (Field, 2006). The final constructs are used for testing the hypotheses. The hypotheses capture a direct relationship and a mediating relationship. The data collected is analysed with regression analyses and using the theory of Baron & Kenny (1986). The nature of a mediator variable intervenes between the independent and the dependent variable. Following Baron & Kenny (1986) four conditions must hold in order to determine the existence of a mediating relationship. The four conditions are:
1. The dependent variable (DV) is affected by the independent variable (IV). The independent variable must be significant.
DV = (IV, CV)
2. The mediator (MV) is affected by the independent variable. The independent variable must be significant.
MV = (IV)
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IV, MV DV
4. The dependent is again affected by the independent and the mediating variable. The independent variable must be insignificant.
DV = (IV, MV, CV)
Accepting a perfect mediation relationship is possible when the independent variable is insignificant when the mediating variable is controlled. A partial mediation exists when the independent variable is less significant in the final condition in comparison with the first condition. For knowing how much decrease in significance is necessary for a partial mediation, a Hausman test can be conducted. All conditions are tested with the help of four regression analyses conducted in SPSS.
4. RESULTS
This chapter shows the results of the tests conducted. It follows the steps described in the previous paragraph.
Factor analysis
Prior to the factor analysis, two tests show the suitability for a factor analysis. The KMO index showed a value of 0,750, which is higher than the proposed index of >0,50 (Williams et al. 2010). The Bartlett’s test of sphericityresulted in a significant value (p=0,000).
24 Cronbach alpha
The Cronbach alpha measures the internal consistency of the remaining items for each construct. The Cronbach alphas of the constructs are shown in table 4.2. All alphas are ≥,750. Meaning a good internal consistency exists within the constructs. Table 4.2 also shows descriptive statistics and the correlations between the different constructs. The table shows the companies have the most trust in the ability of their partner (Mean = 5,697). It also shows some significant correlations, in which performance is correlated with ability (r= 0,248, p=<0,05), integrity (r=.372, p=0,05) and enabling IT (r=,189, p=<,1).
TABLE 4.1
Exploratory factor analysis
Variable Trust
Ability Benevolence Integrity
Control
Enabling Controlling Performance
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Descriptive Statistics and Correlation Matrix
Mean St. Dev. α A B C D E F G H I Ability trust A 5,697 0,762 0,836 Benevolence trust B 4,947 0,985 0,811 0,384*** Integrity trust C 5,159 0,799 0,750 0,447*** 0,456*** Enabling IT D 4,574 1,379 0,929 0,122 0,001 0,53 Controlling IT E 4,003 1,372 0,915 0,101 -0,048 -0.49 0,625*** Performance F 4,304 1,001 0,819 0,248** 0,161 0,372*** 0,189* 0,075 Trust propensity G 4,12 ,639 0.603 0,160 0,144 0,251* 0,024 -0,193 0,028
Length relationship H 12,30 14,083 n/a -0,026 -0,021 -0,064 0,214 0,112 0,000 0,147
Experience I 45,67 50,035 n/a 0,076 0,091 0,173 0,087 0,208* 0,078 0,021 0,104
26 Testing the hypotheses
The final step of the analysis is testing the hypotheses, using several regression analyses and by following the conditions of Baron & Kenny.
Hypothesis 1 The degree of enabling IT usage increases the level of firm performance.
Hypotheses 1 stated the usage of enabling IT has a positive effect on performance. In order to analyze this relationship a regression analysis is performed with enabling IT regressed on performance. The results are shown in table 4.3. The regression was significant (p = 0,091). Meaning hypothesis 1 is supported. The usage of enabling IT has a positive effect (b = 0,211) on performance. The model shows 6,4% of the total variation is explained by the variation of enabling IT.
TABLE 4.3 Results hypothesis 1
Dependent variable - Performance Model 1 (B) (P) Model 2 (B) (P) Control variable Trust propensity ,037 ,774 ,007 ,956 Length relationship -,035 ,776 -,042 ,728 Experience -,148 ,776 -,173 ,171 Number employees ,065 ,602 ,063 ,606 Independent variable Enabling IT ,211* 0,091 R2 ,023 ,064 Δ R2 ,041 F ,393 ,913 Note: *p<0,1 **p<0,05 ***p<0,01
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Hypothesis 2 The degree of controlling IT usage increases the level of performance.
Hypothesis 2 is tested with a regression analysis. The usage of controlling IT is regressed on performance. The analyses was insignificant (p = 0,441). Meaning hypothesis 2 is not confirmed. The results are shown in table 4.4. The table does not support the relationship between the usage of controlling IT and performance within an inter-firm collaboration.
TABLE 4.4 Results hypothesis 2
Dependent variable - Performance Model 1 (B) (P) Model 2 (B) (P) Control variable Trust propensity ,032 ,800 ,019 ,882 Length relationship ,000 1,000 ,015 ,901 Experience -,159 ,209 -,170 ,183 Number employees ,062 ,614 ,059 ,632 Independent variable Controlling IT ,095 ,441 R2 ,026 ,034 Δ R2 ,008 F ,464 ,489 Note: *p<0,1 **p<0,05 ***p<0,01
Note: Standardized β coefficients are reported
Hypothesis 3. The effect of enabling IT usage on the level of performance is mediated by the intensity of trust.
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enabling IT and ability trust. All conditions must hold in order to determine the existence of a mediating relationship. Due to an insignificance value (p = 0,280) under condition 2, a relationship mediated by ability trust is ruled out.
TABLE 4.5 Results hypothesis 3a
Condition 1 Condition 2 Condition 3 Condition 4 Hypothesis 3a DV = (IV, CV) MV = (IV) DV = (MV, CV) DV = (IV, MV, CV)
Enabling IT - Ability trust - Performance B = ,211* P = ,091 R2 = ,064 Δ R2 = ,041 F = ,913 B = ,122 P = ,280 R2 = ,15 Δ R2 = n/a F = 1,185 B = ,274* P = ,022 R2 = ,098 Δ R2 = ,071 F = 1,518 B = ,171 P = ,153 R2 = ,158 Δ R2 = ,027 F = 2,057* Note: *p<0,1 **p<0,05 ***p<0,01
Note: Standardized β coefficients are reported.
Hypothesis 3b stated the relation between the degree of enabling IT usage and performance is mediated by the intensity of benevolence trust. For which enabling IT is positively related with benevolence trust, which in turn is positive related with performance. Again four regression analyses were performed in order to support a mediating relationship. Table 4.6 shows the results of the regression analysis. Condition 2 has an insignificance value (p = 0,993) and condition 3 has an insignificance value (p = 0,269). Meaning no support is found for a mediating relationship, mediated by benevolence trust.
TABLE 4.6 Results hypothesis 3b
Condition 1 Condition 2 Condition 3 Condition 4 Hypothesis 3b DV = (IV, CV) MV = (IV) DV = (MV, CV) DV = (IV, MV, CV)
Enabling IT - Benevolence trust - Performance B = ,211* P = ,091 R2 = ,064 Δ R2 = ,041 F = ,913 B = ,001 P = ,993 R2 = ,000 Δ R2 = n/a F = ,000 B = ,138 P = ,269 R2 = ,043 Δ R2 = ,017 F = ,614 B = ,209* P = ,096 R2 = ,082 Δ R2 = ,040 F = ,969 Note: *p<0,1 **p<0,05 ***p<0,01
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Hypothesis 3c predicts the relation between the degree of enabling IT usage and performance is mediated by the intensity of integrity trust. In which enabling IT is positively related with integrity trust, which in turn is positive related with performance. In order to support the hypothesis four regression analyses were performed. The results are presented in table 4.7. The regression analysis under condition 2 was not significant (p = 0,642). Meaning condition 2 is not met. Concluding, the relationship between enabling IT and performance mediated by integrity trust is not supported.
TABLE 4.7 Results hypothesis 3c
Condition 1 Condition 2 Condition 3 Condition 4 Hypothesis 3c DV = (IV, CV) MV = (IV) DV = (MV, CV) DV = (IV, MV,
CV) Enabling IT – Integrity trust - Performance B = ,211* P = ,091 R2 = ,064 Δ R2 = ,041 F = ,913 B= ,053 P= ,642 R2 = ,003 Δ R2 = n/a F = ,218 B = ,399*** P = ,001 R2 = ,177 Δ R2 = ,148 F = 2,972** B = ,182 P = ,117 R2 = ,209 Δ R2 = ,031 F = 2,871** Note: *p<0,1 **p<0,05 ***p<0,01
Note: Standardized β coefficients are reported.
Hypothesis 4. The effect of controlling IT usage on the level of performance is mediated by the intensity of trust.
30 TABLE 4.8 Results hypothesis 4a
Condition 1 Condition 2 Condition 3 Condition 4 Hypothesis 4a DV = (IV, CV) MV = (IV) DV = (MV, CV) DV = (IV, MV, CV) Controlling IT - Ability trust - Performance B = ,095 P = ,441 R2 = ,034 Δ R2 = ,008 F = ,489 B = ,101 P = ,368 R2 = ,010 Δ R2 = n/a F = ,820 B = ,274* P = ,022 R2 = ,098 Δ R2 = ,071 F = 1,518 B = ,058 P = ,631 R2 = ,102 Δ R2 = ,003 F = 1,288 Note: *p<0,1 **p<0,05 ***p<0,01
Note: Standardized β coefficients are reported.
Hypothesis 4b stated the relationship between the usage of controlling IT and performance is mediated by benevolence trust. More specifically, controlling IT is negatively related with benevolence trust, which in turn is positive related with performance. Although this relationship is already not supported, the results of the four regression analyses are shown table 4.9. The results do not only show an insignificant relationship under condition 1. Also conditions 2 (p =0,671) and 3 (p = 0,269) are not met. To clarify, a relationship between controlling IT and performance mediated by benevolence trust is not supported.
TABLE 4.9 Results hypothesis 4b
Condition 1 Condition 2 Condition 3 Condition 4 Hypothesis 4b DV = (IV, CV) MV = (IV) DV = (MV, CV) DV = (IV, MV, CV) Controlling IT - Benevolence trust - Performance B = ,095 P = ,441 R2 = ,034 Δ R2 = ,008 F = ,489 B = -0,048 P = 0,671 R2 = ,002 Δ R2 = n/a F = ,182 B = ,138 P = ,269 R2 = ,043 Δ R2 = ,017 F = ,614 B = 0,101 P = 0,417 R2 = .053 Δ R2 = ,010 F = ,619 Note: *p<0,1 **p<0,05 ***p<0,01
Note: Standardized β coefficients are reported.
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performed for hypotheses 4c are shown in table 4.10. As discussed earlier condition 1 does not hold. In addition, also condition 2 (p = 0,661) does not hold. Meaning a mediation of integrity trust in the relationship of controlling IT and performance is not confirmed.
TABLE 4.10 Results hypothesis 4c
Condition 1 Condition 2 Condition 3 Condition 4 Hypothesis 4b DV = (IV, CV) MV = (IV) DV = (MV, CV) DV = (IV, MV, CV) Controlling IT – Integrity trust - Performance B = ,095 P = ,441 R2 = ,034 Δ R2 = ,008 F = ,489 B = -0,049 P = 0,661 R2 = ,002 Δ R2 = n/a F = ,194 B = ,399*** P = ,001 R2 = ,177 Δ R2 = ,148 F = 2,972** B = 0,101 P = 0,382 R2 =,184 Δ R2 = ,009 F = 2,520** Note: *p<0,1 **p<0,05 ***p<0,01
Note: Standardized β coefficients are reported.
Control variables
This research uses four control variables. The four control variables which were included do not significantly affect the performance of inter-firm collaboration. Trust propensity however does significantly affect the usage of controlling IT (R2 =,074; F=1,460; P = ,093; B = -,197). Meaning the higher the degree of trust propensity, the lower the usage of controlling IT is. In addition, the same control variable also influences the level of integrity trust (R2 = ,074; F = 1,477; P = ,020; B = ,273). Hence, the higher the tendency to trust, the higher the belief the partner holds to the principles of the company. Secondly, the length of the collaboration significantly influences the usage of enabling IT (R2 = ,062; F = 1,193; P = ,083; B = ,216). Meaning the longer the collaboration exists, the better partners can use enabling information systems.
32 FIGURE 4.1
Results
5. DISCUSSION
This section adequately interpreted the findings of the research. In addition, it includes an explanation for the relationships found which may or not may be in compliance with existing theories.
This research focusses on increasing the firm performance by the establishment of an inter-firm collaboration. To increase the firm performance the organization of resources is of great importance, here specified in IT and trust. Results from previous literature showed contradicting theories about the relationships between the three constructs: information technology, trust and performance. This research examines the relationship three dimensional by recognizing all three trust dimensions of Mayer et al. (1995). This way, the results provide more detailed information about the relations between IT, trust and performance. Although the results show no mediating effect of trust on the relationship between IT usage and firm performance, it does show some important direct relationships to increase firm performance. For which the results show the positive effects of ability trust, integrity trust and enabling IT on the level of firm performance. The results also indicate trust plays a more significant role in determining performance than IT does. More specific, integrity trust increases firm performance the most. Concluding, the results
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of this research show two separate routes to maximize the performance, the route of trust and IT. The following compares the results with the existing theories.
Information Technology & Firm Performance
Hypotheses 1 and 2 pronounce an increase in firm performance with the use of enabling IT and controlling IT. The results show however only support for one hypothesis; an increase with the use of enabling IT. Information technology is seen as a form of control, which by definition can be executed in order to influence the partner’s activities for the benefit of the firm’s own objectives (Coletti et al. (2005); Inkpen & Currall, 2004; Leifer & Mills, 1996). This is in compliance with Sanders & Premus (2005) who stated IT is directly and positively related to performance, in which their capabilities increase cooperation and information sharing. With this research a contribution to their study can be made, because the use of IT determines the effect on performance. Only the usage of enabling IT enhances performance.
Where the results show a significant increase in firm performance with the use of enabling IT, the results do not show a significant negative effect with the use of controlling IT. Meaning, there is no support for stating that firm performance can be increased with the help of IT when information is used to control. This raises a second question, because the controlling form of IT is still seen as a form of formal control, but does not increase performance such as enabling IT. Therefore a significant difference may exist between the two uses of information which ensures the effect on performance differs.
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here is used for the use of controlling or evaluation, from this evaluation the partners can learn, assuming a degree in learning as a performance outcome. The theory of Birnberg et al. (1983) stated partners within collaborations may have a tendency to distort information. When information is used to control the partner, the tendency to distort may be greater when information is used to enable the partner. When information is distort, no true information is transferred, meaning the increase in firm performance may be impeded.
A different reason for not finding support for the pronouncement of the increasing effect of controlling IT on firm performance regards the inflexibility of adjusting the activities after they are done. Because this research has been done within the technical/industrial sector, flexibility is of great importance due to the uncertain environment. Therefore this disadvantage may have a greater influence on firm performance as it would have in other sectors. Although theory argues information technology affects effective communication and therefore increases performance (Paulraj, Lado & Chen, 2008) , the way IT affects effective communication is unclear. Future research which includes the effective communication as a mediator to performance could capture the true effect
Information Technology & Trust
This research hypothesized a mediating effect of trust on the relation between IT usage and performance. However, the results show no support for a mediating relationship. The rationales why lie in the conditions of Baron & Kenny (1986). One condition concerns the relationship between IT and trust. For which no relation is found between both usages of IT and all three dimensions of trust. The results did show the pronounced positive effect of enabling IT and trust, only this effect was not supported by statistical significance. The same holds for the negative pronounced effect of controlling IT trust, with one exception. This exception refers to a positive effect of control on ability trust, only with a non-significant positive effect.
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earlier, social control is concerned with the achievement of aligning norms and values. However these are not the characteristics of enabling IT. The enabling form of IT may even be more in compliance with behavior control, for which the IT systems enables the partner to act in a certain way. According to Das & Teng (2001) behavior control does not increase trust, explaining the results do not show a significant value. The same holds for the controlling use of IT information, which is in compliance with the output control of Ouchi (1979). This form is concerned with stating and achieving the goals. Theory stated control has not a positive influence on trust (Das & Teng, 2001; Grossman, 2004; Vlosky et al., 1997).
However, although no significant positive effect is found, a significant negative effect is also ruled out by the results. Because theory states either a positive or a negative effect, one should expect a significant effect. Within this area a second reasoning can be found referring to the sample size. Meaning an issue of power. Because the sample size is small, too much noise could have affected the true effect.
Trust & Firm Performance
Referring to the relations between trust and firm performance, the results show an increase of firm performance when ability trust or integrity trust increases. These results support the findings of existing theories (Barney & Hansen, 1994; Nicolaou et al., 2011; Powell, Inkpen & Currall, 2004; Sako, 1997). However, because the results of this research do not support a positive relationship between benevolence trust and firm performance, the findings contradict partly the existing theory, for which Sako (1997) even stated benevolence trust is more significant related with performance in comparison with ability trust.
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Following their reasoning, benevolence trust does not decrease performance risk only relational risk. With their own example of performance risk; “despite a keen desire to learn, partner firms often fail to achieve effective learning and knowledge transfer in alliances” (Das & Teng, 2001: 253), firm performance here defined partly as organizational learning, is not increased by benevolence trust. This reasoning may explain the insignificant value between benevolence trust and performance. This research does not include risk. Therefore future studies which include performance risk, can support this theory.
6. CONCLUSION
Existing literature shows the importance of collaborations for firm performance, for which collaboration create competitive advantages in order to coop with a rapid changing environment (Barney, 1991; Coletti et al., 2005) Because partners of a collaborations are highly dependent of each other (Mayer et al. (1995) control is an important mechanisms to ensure partners are behaving in a manner which that achieves firm performance ((Inkpen & Currall, 2004; Leifer & Mills, 1996). Because IT has an increasing capability and an increasing importance in collaborations this research focusses on IT as a form of control. In addition, trust is included due to their highly interdependency (Das & Teng, 1998; Dekker, 2004; Tomkins, 2001; Sako, 1992; Van der Meer-Kooistra & Vosselman, 2007). This research tested the relationship between the usage of information technology and performance by building on the research of Nicolaou et al. (2011). This research extends trust into a three-dimensional examination, as opposed to one-dimensional. The relationships found provide information about the enablers for successful firm performance within inter-organizational collaborations.
The research question of this research was stated as follows: “What is the relationship between
information technology, trust and firm performance within industrial inter-firm collaborations?”
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research does show ability and integrity trust is positive related with firm performance. In addition, it also to be found that trust plays a greater role in enhancing firm performance in comparison with the usage of enabling IT. Concluding, this research show two separate routes for the increase of firm performance within inter-firm collaborations; the use of enabling IT and trust, including ability and integrity trust.
6.1 Limitations and future research
Important to recognize are the research limitations which bounded the results. The first and upmost important limitation is the limited number of respondents. Using the thumb rule of ten respondents per independent variable implies 85 respondents are sufficient. However, we must not forget this is still a limited number of respondents and according to other theories insufficient. Due to time restrictions the analyses is performed with the collected 86 surveys. Regarding the results of this research, the sample size limits the generalizability. In addition, the founded insignificant values for the relationship of trust and control may be a result of the sample size, resulting in low power for which the true effect could not be captured. Future research which captures a higher sample size, could find more significant results.
Secondly, as also stated earlier, the questions asked in the survey were highly perceptual. Meaning the results differ from person to person and even may differ from partner to partner within one collaboration. Hence, the beliefs of the responded company might differ from the perceptions of their partner. Because this research is done from one perspective, future research representing all partner perspectives could provide deeper insights in any different performance outcomes. Also, in this case the collaboration performance could be analysed in comparison with the performance of one firm.
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capture these effects. Also the degree of cooperation is excluded in this research. The cooperation aspects may mediates and strengthen the relationship between control and trust (Coletti et al. 2005).
With refer to the firm performance; the learning capability and thus the capacity to learn, the degree of active involvement and the skills of coping with conflict and misunderstanding may differ between firms (Inkpen & Currall, 2004; Selnes & Sallis, 2003). Meaning also the performance outcomes may differ, affecting the relationship with control and trust.
These limitations and the results of this research suggest a need for future research. With building further on this research several variables could be included in future research to create a more extensive research. This concerns the involvement of interdependency, cooperation and risk. Interdependency is according to Mayer et al. (1995) and Tomkins (2001) of influence on the trust constructs. Controlling for this construct in future research will provide a more comprehensive representation of the relationships between IT, trust and performance. The same holds for incorporating cooperation, which according to Coletti et al. (2005) mediates the relationship between control and trust. In future research, cooperation can be used as a mediator. Hence, examining whether a positive relationship can arise between both usages of IT and trust. Risk is influenced by trust and control (Das & Teng, 2001). Therefore, risk can be a second mediator in future research between trust and performance. A second suggestion for future research concerns a longitudinal study. This research stresses the importance of the individual influence of trust dimensions. How these individual aspects are developing over time is an interesting subject. Another important field for research is capturing all the partners of a collaboration in one research. Findings may show the presents of hierarchy in collaboration, which can influence the usage of control and the degree of trust. Because the literature field of trust and control is still under debate, future research could help to provide a better understanding of the influences towards the performance within inter-firm collaborations.
6.2 Theoretical and managerial implications
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with the use of the transaction cost theory, but also takes on the organizational learning in consideration as a firm performance outcome. With this reason, the relationships found provide more depth and understanding in the existing models of IT, trust and performance. Resulting in a better assessment of the organization of appropriate resources in order to increase the firm performance with entering a collaboration.
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