Journal of Operations Management 26 (2008) 349–367

www.elsevier.com/locate/jom

Pattern of information technology use: The impact

on buyer–suppler coordination and performance
Nada R. Sanders *
M.J. Neeley School of Business, Texas Christian University, TCU Box 298530, Fort Worth, TX 76129, United States
Received 11 November 2006; received in revised form 28 June 2007; accepted 9 July 2007
Available online 19 July 2007

Abstract
The use of information technologies between supply chain organizations has been shown to promote organizational coordination
and have a positive impact on performance. Drawing from organizational theories of learning, we build on this research by
proposing a model that relates the pattern of supplier use of IT to specific types of supply chain coordination activities and a
comprehensive set of organizational benefits. Specifically, we evaluate how two patterns of IT use by suppliers (exploitation and
exploration) relate to two specific types of coordination activities with their buyers (operational and strategic coordination), which
in turn are posited to promote specific organizational benefits. Using data from 241 first-tier OEM suppliers in the computer
industry, our findings show that each pattern of IT use directly promotes a specific type of coordination activity. Although both types
of coordination activities are needed to achieve both strategic and operational benefits, we find each coordination activity to be
uniquely promoted by a specific pattern of IT use. IT use for exploitation is found to be an antecedent to operational coordination; IT
use for exploration is found to be an antecedent to strategic coordination. No crossover between pattern of use and coordination
activities is found. Our findings show that to achieve a complete set of benefits, suppliers must ultimately use IT for both exploration
and exploitation. These findings provide a deeper understanding of the mechanism of how the pattern of IT use can result in a
comprehensive set of organizational benefits for supplier firms.
# 2007 Elsevier B.V. All rights reserved.

Keywords: Buyer–supplier coordination; IT use; Exploration; Exploitation; Supplier performance; Supply chain management; Structural equation
modeling

1. Introduction 2003; Determirhan et al., 2007), and has found IT to

The study of organizational IT deployment has been
thematic in recent literature, given the rapid growth in
IT capability and use, both within organizations and
between supply chain partners (Saeed et al., 2005; Ward
and Zhou, 2006). The extant research has documented a
positive link between overall IT capability and firm
performance (Bharadwaj, 2000; Kearns and Lederer,
* Tel.: +1 614 284 3908; fax: +1 816 257 7227.
E-mail addresses: n.r.sanders@tcu.edu, Nrsanders@aol.com,
nadia.sanders@wright.edu.
have the potential of providing a significant competitive
advantage to firms (Earl, 1993; Ives and Jarvenpaa,
1991; Kathuria et al., 1999). However, numerous
inconsistencies have been observed in these findings,
with many studies finding IT investments to not result in
the expected performance benefits (Brynjolfsson and
Lorin Hitt, 2003). Researchers have suggested that these
inconsistencies result from simplicity in conceptualiza-
tion of key constructs and that findings are dependent on
a range of organizational factors, including the manner
in which IT is used within the organizational context,
measures of performance used, management practices,
and organizational structure (Lim et al., 2004; Sriram

0272-6963/$ – see front matter # 2007 Elsevier B.V. All rights reserved.
doi:10.1016/j.jom.2007.07.003
350 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367
and Stump, 2004; Subramani, 2004). These incon-
sistencies reflect the complexity of the problem and
underscore the need for more in-depth research on the
organizational impact of IT and its use within the supply
chain framework.
Information technology (IT) plays a critical role in
supply chain management (SCM) activities (Kearns and
Lederer, 2003), as it permits the sharing of large
amounts of information between supply chain partners.
Not surprising, studies on the overall use of IT have
found it to improve inter-organizational coordination
(Co et al., 1998; Small, 1999; McAfee, 2002). In turn,
inter-organizational coordination has been shown to
have a positive impact on select firm performance
measures, such as customer service, lead-time, and
production costs (Vickery et al., 2003; Stank et al.,
2001). Within the field of operations management (OM)
research has primarily focused on the organizational
factors impacted by IT use, such as various aspects of
coordination and performance (Gailbraith, 1973;
Huber, 1982; Dennis, 1996; Vickery et al., 2003; Ward
and Zhou, 2006). By contrast, research within
information systems (IS) has primarily focused on
the manner in which IT is used within the organizational
context (Subramani, 2004). Deeper insight into these
relationships would be gained by combining the focus
of both research streams and looking at all the
constructs and their relationships at a greater level of
detail. This would combine studying the manner in
which IT is used within the organizational context,
greater complexity of the constructs measuring inter-
organizational coordination, and more comprehensive
measures of firm performance.
The goal of this research is to provide a study that
extends current knowledge on how IT use impacts buyer–
supplier coordination and supplier performance, from the
viewpoint of supplier firms. Specifically, we test a model
that links the manner in which IT is used, termed
intentionality or ‘‘pattern’’ of IT use (DeSanctis and
Poole, 1994; Subramani, 2004), by suppliers to specific
types of coordination activities with their buyers, which
in turn are posited to promote specific organizational
benefits. Drawing from theories of learning that suggest
two fundamental dimensions of organizational actions
(Nelson and Winter, 1982; March, 1991), pattern of IT
use is divided into two constructs, one measuring IT use
for exploitation and the other for exploration. These
patterns differ in the intentionality or purpose of
technology use, with the former using IT to improve
current methods of problem solving, while the latter uses
IT to uncover new methods of problem solving. As such
these patterns of use are complementary to one another
and, according to theory set forth by March (1991), both
types of actions are ultimately important for long-run
organizational survival.
Buyer–supplier coordination, as perceived by the
supplier, is measured at two levels. The first measures
coordination at the operational level and the second at
the strategic level. Finally, organizational performance
is measured using a broad set of benefits, which include
both operational and strategic performance measures,
measured from the viewpoint of supplier firms. As such,
this study provides a more thorough analysis of the
impact of IT use on buyer–supplier coordination and on
organizational performance, as perceived by the
supplier (Barua et al., 1995; Mukhopadyay and Kerke,
2002; Subramani, 2004). The relationships tested by the
proposed model and the constructs used are directly
derived from the literature.
Our study differs from previous research in a number
of important ways. First, unlike the majority of past
studies that focus on benefits of IT use to buying firms,
our study focuses on benefits to suppliers of OEM firms,
as perceived by the supplier. The decision to invest in
information technologies is particularly important for
supplier firms that are typically disproportionately
smaller in size compared to their buyers and must
appropriate larger portions of their budgets to develop a
technological capability (Benton and Maloni, 2005;
Subramani and Venkatraman, 2003; Lee, 2004). In fact,
a study by Angeles and Nath found buying firms to be
significantly larger than supplier firms both in terms of
net sales and the number of employees (Angeles and
Nath, 2001). Some studies even suggest that the benefits
of IT that accrue to buyers may elude suppliers for these
reasons (Carter, 1990; Clemons and Row, 1992).
Indeed, Maloni and Benton (2000) showed that an
imbalance of power exists between buyers and
suppliers, in favor of buyers, suggesting that suppliers
may be under greater pressure to adopt technologies and
processes of their primary buyer. Supporting this
argument, Saeed et al. (2005) make a distinction
between firms that initiate the use of inter-organiza-
tional IT (typically buying firms) and firms that
participate in its use (typically suppliers), and provide
support for the former being primary beneficiaries of
such IT systems. Further, Lee (2004) underscores the
financial difficulties of supplier firms to raise capital for
technologies compared with buyers, due to their smaller
size. Therefore, greater understanding of the benefits
that these technologies provide to supplier firms is an
issue of interest to both managers and researchers.
Second, unlike past studies that primarily focus on
financial performance measures, market share measures,
 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367
or a narrow range of operational performance measures,
our study measures a more comprehensive set of benefits.
Strategic and operational benefits together are considered
to comprise a set of first-order organizational benefits,
which in turn are expected to impact second-order
benefits for the firm (Mukhopadyay and Kerke, 2002;
Melville et al., 2004). Operational benefits are a result of
the lowering of transaction and production costs derived
from the use of an inter-organizational IT, and include
more efficient inventory management, automated billing
and payment settlement, and automated business
processes. They include process improvement, cost
efficiencies, and improved customer service. Strategic
benefits are a result of a stronger relationship with
customers, and include knowledge of customer-driven
product features and enhancements, and increased sales
volume. First-order operational and strategic benefits, in
turn, are posited to generate second-order benefits for the
firm, which occur over the long run, and include measures
such as improved financial performance and market share
(Mukhopadyay and Kerke, 2002; Subramani, 2004).
Unlike past studies, our study looks at a broad set of first-
order benefits and, as such, provides a more compre-
hensive evaluation of supplier performance.
Third, unlike the majority of past studies that focus
on benefits of general IT use and its impact on
coordination as a whole (Stank et al., 2001; Sanders and
Premus, 2005), our study focuses on the pattern of IT
use and an evaluation of how different patterns impact
different types of coordination activities. As such, this
analysis provides a richer and much needed under-
standing of the impact of IT on buyer–supplier
coordination, as perceived by suppliers.
Using data from 241 first-tier OEM suppliers in the
computer industry, our findings show that each pattern of
IT use directly promotes a specific type of coordination
activity. Although results show that both types of
coordination activities are needed to achieve both
strategic and operational benefits, we find each coordina-
tion activity to be uniquely promoted by a specific pattern
of IT use. IT use for exploitation is found to be an
antecedent to operational coordination; IT use for
exploration is found to be an antecedent to strategic
coordination. No crossover between pattern of use and
coordination activities is found. Our findings show that to
achieve both types of benefits, suppliers must ultimately
use IT for both exploration and exploitation. These
findings provide support for the theory set forth by March
(1991) as it pertains to the organizational use of IT, and
provide a deeper understanding of the mechanism of how
the pattern of IT use can result in a broad set of
organizational benefits for supplier firms.
351
2. Literature review
2.1. Patterns of IT use
A review of the IT literature reveals mixed results with
respect to organizational outcomes achieved from IT use
(Dos Santos and Sussman, 2000; Sriram and Stump,
2004; Subramani, 2004). These mixed results have even
been dubbed the ‘‘productivity paradox’’ to denote the
inconsistencies observed in findings (Brynjolfsson and
Lorin Hitt, 2003). One suspected reason for these
inconsistencies may be the broad range of objectives
expected from the implementation and use of IT in
organizations (Lim et al., 2004; Sriram and Stump, 2004;
Dos Santos and Sussman, 2000; Stratopoulos and
Dehning, 2000). These objectives range from narrow
operational improvements, such as reducing specific
operational costs or improving customer service, to broad
strategic benefits, such as gaining a competitive
advantage (El Sawy et al., 1999; Premkumar et al.,
1997). Other explanatory variables that have been
identified as possible causes of the incongruence in
findings include breadth, depth, scope, and intensity of IT
use (Bensaou and Venkatraman, 1995; Massetti and
Zmud, 1996). Albeit descriptive, these dimensions fail to
provide a direct linkage between IT use and variations in
organizational outcomes.
Another possible reason for the incongruence in
findings of past studies is that the use of IT in different
contexts is typically motivated by differences in
objectives, hence the intentionality or purpose of use
is different. These differing objectives are manifested in
the way IT is used (DeSanctis and Poole, 1994), with
recent research suggesting that indeed it may be the
pattern of IT use that is a contributor to differing
outcomes (Subramani, 2004).
Differences in the pattern of IT use, also known as the
concept of appropriation, have been shown to lead to
different outcomes, irrespective of similarity of context
or technology used. Appropriation, or pattern of use, is a
result of intentionality, purpose, or motivation, and as
such could also be useful in relating IT use to
organizational outcomes. For example, in a study by
DeSanctis and Poole (1994) differences in appropriation
were found to lead to differences in decision processes
and outcomes, when tested in small group meetings using
group decision support systems (GDSS).
To explicate the construct of appropriation we draw
from learning theory, which categorizes organizational
actions as either those for exploitation or exploration
(March, 1991). Exploitation involves actions that refine
old and established patterns. This would include
352 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367
improving operational efficiency through measures
such as increasing standardization or tightening process
control. Exploration, on the other hand, involves actions
that establish new patterns or use old patterns in
different ways to bring value to the organization.
Exploitation involves improving current methods to
solve problems, whereas exploration involves uncover-
ing new methods to solve problems. Exploitation
involves a focus on efficiency, consistency and process
control, whereas exploration involves risk taking and
experimentation. Exploitation is defined by terms such
as search, innovation, and discovery, with benefits
occurring over a longer time horizon. On the other hand,
exploitation is defined by terms such as refinement,
implementation and execution, with benefits occurring
over a more immediate time period. Further, exploita-
tion has a more localized impact, whereas the impact of
exploration diffuses beyond the organization. Deben-
ham and Wilkinson (2006) offer a clear distinction
between the two categories of organizational activities
stating the following: ‘‘Strategies focusing on the same
products in the same markets are examples of
exploitation strategies. All the rest involve some form
of exploration, be that new means of serving existing
markets, new markets for existing products or new
products and market combinations.’’ These differences
are further summarized in Table 1.
Applied to the use of IT in organizations, exploita-
tion and exploration reflect two complementary patterns
of IT use. These patterns are aligned with the distinction
between automating and informating, the two broad
motives for using information systems offered by the
literature in information systems (DeSanctis and Poole,
1994; Venkatraman, 1994; McNurlin and Sprague,
2002). Theories of information systems hold that
information systems within organizations can on the
one hand serve to ‘‘automate’’ organizational tasks,
such as automating billing, report preparation, inven-
tory management, and financial analysis. Automating
tasks focuses on efficiency and is aligned with the
organizational action of exploitation. By contrast,
information systems can serve to ‘‘informate,’’ provid-
Table 1
Defining characteristics of exploitation and exploration in organizational learning
Exploitation
Description Refinement of old patterns
Expected value Efficiency of current system
Variability of returns Predictable and more certain
Timing of returns Short-run
Distribution of returns Spatial proximity—individual knowledge
ing information to support organizational decision-
making and exchange of ideas, a concept aligned with
exploration.
A study by Subramani (2004) looked at the pattern of
IT within the context of inter-organizational IT use,
albeit in limited form. The study looked at the impact of
pattern of IT use on organizational outcomes and
supplier performance, with results providing support
that pattern of use indeed leads to differences in
outcomes. However, the Subramani (2004) study was
restricted to suppliers of only one retailer, thus limiting
the generalizability of the findings. A more compre-
hensive study of the impact of patterns of IT use on
performance is warranted to elaborate on these initial
and limited findings, and provide broader support.
2.2. IT and organizational coordination
The improvements in coordination among supply
chain partners through the use of IT are well
documented (Frohlich, 2002; Balakrishnan and Geunes,
2004). The use of IT has permitted strong customer and
supplier coordination for inventory planning, demand
forecasting, order scheduling, and customer relation-
ship management (Feeny, 2001). A number of past
studies have evaluated the relationship between IT use
and organizational coordination. Burgess (1998) was
one of the first to identify IT as a critical component of
logistics strategy, noting that IT can provide integration
between supply chain firms and, as a result, can improve
customer service and lower costs. A study by Stoeken
(2000) showed that IT has a direct impact on
coordination and leads to supply chain innovation.
Vickery et al. (2003) further showed a direct link
between integrative information technologies and
supply chain coordination for supplier firms in the
auto industry. Other comparable studies focused on the
benefits of EDI and showed that it provides benefits to
companies by providing speed of information flow and
fostering value-added partnerships between supply
chain organizations (Holland et al., 1992; Scheomber,
1992; Ragatz et al., 1997).
Exploration
Experimentation with new patterns
New ideas; distinctive competency
Variable and less certain
Long-run
Diffused through external network-collective knowledge
 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367
Transaction cost economics has been used as an
argument that IT use promotes supply chain coordina-
tion. The essence of transaction cost theory is that the
type of relationship configuration adopted depends
primarily on cost considerations (Coase, 1937; William-
son, 1975; Stoeken, 2000). As firms source inputs from
other firms they incur transaction costs, which may be
related to costs that include exploring the marketplace
and identifying alternatives. At one extreme, if these
costs become too high, it may be appropriate for firms to
resort to self-production or vertical integration. Different
types of relationships create varying information
processing requirements. Even in the context of long-
term relationships transaction costs exist, typically in the
form of the continuous need for adaptation and
evaluation. There is agreement among researchers on
the role of IT use between firms in reducing coordination
costs and transaction risk (Malone et al., 1987; Clemons
and Row, 1992; Clemons et al., 1993). Although there is
some disagreement on the ultimate impact of this on
organizational relationships (Saeed et al., 2005), a large
body of research supports the notion that the outcome is a
more integrated buyer–supplier relationship (Noote-
boom, 1992; Hess and Kemerer, 1994; Holland and
Locket, 1997; Kambil et al., 1999).
Within the field of operations management (OM)
research on the impact of IT use on coordination has
evolved from the study of overall buyer–supplier
coordination (Vickery et al., 2003) to specific areas
of coordination, ranging from the role of IT on lean/JIT
integration (Ward and Zhou, 2006) to the impact on
joint decision-making process time (Gailbraith, 1973;
Huber, 1982; Dennis, 1996). By contrast, research
within information systems (IS) has focused more on
the actual use of IT, including the role of organizational
culture on IT use and performance (Livari and Huisman,
2007) and the pattern of IT use (Subramani, 2004). In
fact, Ward and Zhou (2006) note that the IT literature
views the relationship between IT and performance as a
black box, focusing solely on the relationship between
IT use and performance and ignoring the variables that
mediate the effect. Given the strengths of both research
streams, it makes sense to combine them, one being the
focus on the actual use of IT and the other looking at
specific aspects of coordination impacted by its use.
2.3. Organizational coordination and firm
performance
Supply chain management takes a systems view
regarding all activities and functions that are needed to
bring a product or service to market. This view recognizes
353
that the value creation process extends beyond the
boundaries of the firm, and involves integrated business
processes among entities of the chain, such as suppliers,
manufacturers, and customers (Stevens, 1989; Tan et al.,
1998). The theoretical foundation for this view can be
traced back to Porter’s value chain model (Porter, 1980,
1985) that advocates exploitation of ‘‘linkages’’ within a
firm’s value chain and between the value chains of its
suppliers and customers. Exploitation of these ‘‘lin-
kages’’ is expected to lead to superior performance (e.g.
Tan et al., 1998; Frohlich and Westbrook, 2001; Vickery
et al., 2003) and promulgates the idea that individual
organizations that comprise the supply chain must
ultimately be managed as a single entity or one complete
system. Achieving this requires integration, collabora-
tion, and coordination across individual firm functions
and throughout the supply chain.
Research consistently supports the idea that integra-
tion between firms improves firm performance (Stevens,
1989; Lee et al., 1997; Metters, 1997; Narasimhan and
Jayaram, 1998; Lummus et al., 1998; Anderson and Katz,
1998; Hines et al., 1998; Johnson, 1999; Frohlich and
Westbrook, 2001; Vickery et al., 2003; Ward and Zhou,
2006). Problems of nonintegration between firms have
been well documented beginning with Forrester’s (1961)
seminal work (Lee and Billington, 1992; Hammel and
Kopczak, 1993; Frohlich and Westbrook, 2001). Lack of
coordination has been shown to create the classic
magnification of demand up the supply chain, know as
the bullwhip effect, resulting in alternating excess
inventory and stock-outs (Metters, 1997). Having an
integrated supply chain has been shown to provide a
significant competitive advantage relative to both price
and delivery (Lee and Billington, 1992).
The performance benefits of coordination can also be
seen in practice, with today’s most successful manu-
facturers having tight coordination with their supply
chain partners, enabling real-time information sharing
and well coordinated movement of inventories. The
result are products that are delivered quickly and
reliably when and where they are needed, high
responsiveness to short lead times, the elimination of
the bullwhip effect, and improved firm performance
(Lee et al., 1997). For example, the collaborative
relationship between Sears and Michelin using CPFR,
has resulted in a 25% reduction in inventories for both
companies (Steerman, 2003). Similarly, General
Motors’ collaborative relationship with its suppliers
has reduced vehicle development cycle times from 4
years to 18 months (Gutman, 2003).
In the academic literature, buyer–supplier coordina-
tion and its impact on firm performance has been
354 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367
studied as either a single construct (Vickery et al., 2003),
multiple constructs measuring different levels of
coordination, such as internal and external coordination
(Koufteros et al., 2005; Sanders and Premus, 2005) or
constructs focused on specific coordination tasks. These
include coordination within lean/JIT practices (Pyke and
Cohen, 1990; Braun and Mefford, 2004; Ward and Zhou,
2006), buyer–supplier coordination in new product
development (Swink et al., 1996; Hartley et al., 1997;
Petersen et al., 2003), and coordination as a source of
leverage and process efficiency (Saeed et al., 2005).
Collectively these studies provide greater insight into
coordination, underscore its complexity, and suggest that
coordination warrants continued study. Numerous
untested views of buyer–supplier coordination still
remain, such as coordination at different organizational
levels, including strategic versus operational, and
coordination for different organizational tasks.
Although research consistently shows that integra-
tion improves firm performance, most of these studies
have focused on integration from the viewpoint of the
buying firm and consider its impact on a narrow range of
performance measures, such as inventory turnover,
customer service, or cost reductions. More comprehen-
sive work on organizational benefits suggests a model
where information technologies are viewed as creating
direct, first-order benefits, which in turn can generate
indirect, second-order benefits (Barua et al., 1995;
Mukhopadyay and Kerke, 2002). First-order benefits
are those that are a direct result of the firm’s actions and
can be influenced directly by the firm, and include
variables such as cost reductions, inventory turns, and
customer service measures. On the other hand, second-
Fig. 1. Research model linking IT use, organizational coordination, and supplier benefits.
order benefits are competitive outcomes that are
influenced by external factors such as competition
and environmental changes, and include variables such
as market share and profitability. Studies have not yet
looked at the impact of buyer–supplier coordination on
a broader set of first-order benefits, including both
operational and strategic benefits, particularly from the
viewpoint of the supplier. Such evidence would provide
a more comprehensive perspective of the impact of
coordination on firm performance.
3. Research hypotheses
Based on conclusions from the extant literature we
propose a model, shown in Fig. 1, of the relationships
between pattern of IT use, organizational coordination,
and organizational benefits. Two constructs are used for
pattern of IT use: IT use for exploitation (F1) and IT use
for exploration (F2). As specified by Subramani (2004),
based on theory of organizational learning March
(1991), we define IT use for exploitation as the use of IT
for the execution of structured interfirm processes.
Similarly, we define IT use for exploration as the
execution of unstructured interfirm processes.
Organizational coordination is measured by two
constructs: operational coordination (F3) and strategic
coordination (F4). We use the definition of supply chain
coordination as information sharing between supply
chain partners to achieve joint benefits (Chopra and
Meindl, 2007). Operational coordination is defined as
information sharing to achieve efficient task execution
(Subramani and Venkatraman, 2003; Subramani, 2004).
Strategic coordination is defined as information sharing
 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367
for purposes of organizational planning and positioning
strategies (Subramani and Venkatraman, 2003; Sub-
ramani, 2004).
The last set of constructs measure organizational
benefits. We use a complete set of first-order benefits,
including both operational and strategic benefits, for a
more comprehensive analysis (Barua et al., 1995;
Mukhopadyay and Kerke, 2002). Operational benefits
are defined as first-order benefits that arise directly from
lowered transaction and production costs (Mukhopa-
dyay and Kerke, 2002; Subramani, 2004). For example,
the use of IT in SC organizations lowers transaction and
production costs, such as automated invoicing and
inventory tracking, and directly results in operational
benefits. Strategic benefits, on the other hand, are
defined as strategic benefits that arise through firms
positioning themselves to take advantage of opportu-
nities arising from the SC relationship (Mukhopadyay
and Kerke, 2002; Subramani, 2004). For example, the
development of a new product or the ability to correctly
respond to changes in the relationship is a strategic
benefit (Mukhopadyay and Kerke, 2002).
We propose that the two patterns of IT use each have
a positive impact on operational and strategic coordina-
tion, as perceived by supplier firms. The relationship
between IT use, in the broader sense, and supply chain
coordination has been examined in past studies
(Vickery et al., 2003; Subramani, 2004; Raghunathan,
1999). Studies have also tested the relationship between
IT use and other constructs that are related to
coordination (Gaski, 1984; Mohr and Nevin, 1990),
such as relationship commitment (Kent and Mentzer,
2003) and relationship magnitude (Golicic and Ment-
zer, 2006). Further, the use of EDI has been shown to
have a positive impact on SC collaboration (Holland
et al., 1992; Ragatz et al., 1997; Scheomber, 1992). In
addition, researchers have demonstrated that IT use can
decrease coordination costs (Clemons and Row, 1992;
Clemons et al., 1993), expected to bring about increased
coordination (Vickery et al., 2003).
Engaging in exploitation means involvement in
activities that focus on production and efficiency of
tasks, activities that are a part of operational coordina-
tion as defined in this study. By contrast, engaging in
exploration means involvement in activities that focus
on search and experimentation, activities that are a part
of strategic coordination as defined in this study.
Further, the limited research on how pattern of IT use
affects SC relationships finds that differing patterns
have a differential impact on buyer–supplier interac-
tions (Subramani, 2004). Although the study by
Subramani (2004) focused on the alignment of business
355
processes between buyer and supplier rather than
coordination per se, the findings suggest that both
patterns of IT use should have a positive impact on
coordination. Collectively this supports the develop-
ment of our first set of hypotheses:
H1: The higher the level of IT use for exploitation
(IT1) the greater the suppliers’ perceived level of
operational coordination (OC) in the exchange.
H2: The higher the level of IT use for exploration (IT2)
the greater the suppliers’ perceived level of
strategic coordination (SC) in the exchange.
H3: The higher the level of IT use for exploitation
(IT1) the greater the suppliers’ perceived level of
strategic coordination (SC) in the exchange.
H4: The higher the level of IT use for exploration (IT2)
the greater the suppliers’ perceived level of
operational coordination (OC) in the exchange.
We further propose that operational and strategic
coordination each have a direct impact on both strategic
and operational supplier benefits. Higher levels of both
types of coordination are expected to contribute to
improved organizational performance. Vickery et al.
(2003) provide empirical support for the link between
SC integration and customer service performance. Their
study finds a significant impact of supply chain
integration on elements of customer service perfor-
mance for firms in the auto industry. Similarly, Stank
et al. (2001) find coordination, an element of integra-
tion, to positively impact firm performance. This leads
us to our next set of hypotheses:
H5: Operational coordination (OC) has a direct and
positive impact on suppliers’ operational benefits
(OB).
H6: Strategic coordination (SC) has a direct and
positive impact on suppliers’ strategic benefits
(SB).
H7: Operational coordination (OC) has a direct and
positive impact on suppliers’ strategic benefits
(SB).
H8: Strategic coordination (SC) has a direct and
positive impact on suppliers’ operational benefits
(OB).
4. Methodology
4.1. The sampling procedure
The research methodology used is based on
empirical data collected through a questionnaire survey
356 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367

of first-tier suppliers to OEM firms in the electronic Table 2

computer industry (SIC 357). We wanted to focus on Frequency distribution of sales and number of employees
one industry to eliminate confounding of results. Most Annual sales (US$ million) Number of firms Percentage
studies of this type have been conducted in the auto (A) Frequency distribution of annual sales
industry (Dröge et al., 2004; Maloni and Benton, 2000; 1–249.99 77 32.0
Vickery et al., 2003), which primarily relies on EDI as a 250–499.99 69 28.6
means of communication between supply chain firms 500–999.99 44 18.3
1000–1499.99 37 15.3
(Lewis and Talalayevsky, 1997; Van Joek et al., 1998).
1500 and above 14 5.8
We deliberately chose the electronic computer industry
as its members are firms that pioneer the development of 241 100
information technology. As recently noted, the opera- Number of employees Number of firms Percentage
tions from this industry are likely to be prototypical of
future operations (Beckman and Sinha, 2005). The (B) Frequency distribution of number of employees
1–999 64 26.6
industry is dominated by well-known corporations, 1000–1999 68 28.2
including IBM, Hewlett–Packard (HP), Sun Micro- 2000–2999 52 21.6
systems, Fujitsu, Toshiba, Dell, and Xerox. As such, we 3000–3999 20 8.3
expect the use of IT to be widespread in this industry. The 4000–4999 28 11.6
survey instrument was initially pre-tested by four 5000 and above 9 3.7
executives and five academics, for content, readability, 241 100
and ambiguity (Dillman, 2000). Based on results of the
pretest, minor changes were made to select questionnaire 4.2. Tests for non-response and common method
items, and the instrument was mailed to 1000 U.S. first- bias
tier OEM suppliers. We targeted the survey to CEOs as
they would be most likely to have the required The adequacy of the response sample is a concern any
knowledge. This is supported by a study by Phillips time a survey methodology is used. An important part of
(1981) that indicates that high ranking informants tend to ensuring adequacy is to test for non-response bias. To test
be more reliable sources of information than low ranking. for non-response bias chi-square differences were
Rather than subjectively developing the sample frame, calculated between respondents and non-respondents
the contact information used to develop the database was for annual sales revenues (x2 = 4.23, p > 0.05) and
purchased from Wholesale Lists, an online company number of employees (x2 = 5.75, p > 0.05), and found to
specializing in business databases, with the SIC code and be insignificant. The sent surveys were not anonymous,
other criteria specified when purchasing the list. The permitting the identification of respondents and non-
study was conducted in the spring of 2004. respondents. These results collectively suggest that non-
In order to ensure an adequate response rate a response bias is not present in the data (Sabherwal, 1999;
variation of Dillman’s total design method was used in Teo and King, 1997).
the survey process (Dillman, 2000). The initial mailing Common method bias is another potential problem in
included a cover letter and the survey instrument, with survey research (Flynn et al., 1990). To test for common
the latter designed to be merely folded and returned, method bias Harmon’s one-factor test was used
with postage pre-paid. Reminder postcards were sent (Podsakoff and Organ, 1986; McFarlin and Sweeney,
approximately ten days following the initial mailing, 1992). The rationale for this test is that if common
followed by a second survey mailing approximately method variance poses a problem to the data, a single
thirty days later. Those that had already responded were
Table 3
told to ignore the mailing. Fourteen incomplete
Profile of survey respondents
responses were discarded. The mailings yielded 241
usable responses, for a response rate of 24.1%, in line Respondent title Frequency Percentage
with past surveys of this type. Specific demographic 1. President 11 4.6
information of the responding firms is shown in Table 2. 2. CEO 25 10.4
Table 3 shows the distribution of survey respondents. In 3. Senior Vice President 97 40.2
4. Vice President 87 36.0
fact, over 90% of the respondents are at a Vice President 5. Director 17 7.1
level or higher, with the typical respondent holding the 6. Other 4 1.7
title of President, CEO, Senior Vice President, Vice
Total 241 100
President, or Director.
 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367 357

latent factor will account for all or most of the manifest
variables. Five factors with eigenvalues greater than one
were extracted and accounted for a total of 63% of the
variance. The first factor accounted for 17% of the
variance. Therefore, a single factor did not emerge and
one factor did not account for most of the variance,
suggesting that common method bias is not a problem.
4.3. Construct measures
Table 4 shows the model factors and the multiple
variables used to measure each factor. All the scale
items used for each factor are directly derived from past
studies and are based on a seven point Likert type scale.
For Factors 1 and 2 the scale is anchored by 1 = ‘‘no
use’’ and 7 = ‘‘significant use.’’ For Factors 3 and 4 the
anchors are 1 = ‘‘not involved’’ and 7 = ‘‘significantly
involved.’’ Finally, for Factors 5 and 6 the anchors are
1 = ‘‘none’’ and 7 = ‘‘high level.’’ The development of
the scale items is described in this section.
Factors 1 and 2 measure supplier use of IT for both
exploitation (IT1) and exploration (IT2). The three scale
items for Factor 1 measure the extent to which the
supplier uses IT for the following purposes to
communicate with their primary buyer: order proces-
sing, invoicing and settling accounts; exchange of
shipment and delivery information; managing ware-
house stock and inventories. The three scale items
address aspects of using IT to improve current
processes, the definition of IT use for exploitation.
Similarly, three scale items are used to measure Factor
2. They measure the extent to which the supplier uses IT

Table 4
Standardized coefficient values
Factors and scale items Standardized coefficient Standard error t-Value
F1: IT use for exploitation (IT1): a = 0.812 (please indicate the extent to which you use IT to communicate with your primary buyer for the
following:)a
IT1-1: Order processing, invoicing and settling accounts 0.621 0.028 12.14*
IT1-2: Exchange of shipment and delivery information 0.611 0.031 11.47*
IT1-3: Managing warehouse stock and inventories 0.673 0.033 11.46*
F2: IT use for exploration (IT2): a = 0.798 (please indicate the extent to which you use IT to communicate with your primary buyer for the
following:)a
IT2-1: Understanding trends in sales and customer preferences 0.578 0.027 12.12*
IT2-2: Integrating your design and manufacturing functions 0.634 0.023 12.42*
IT2-3: Leveraging your firm’s expertise to create new business opportunities 0.598 0.027 11.56*
F3: Operational coordination (OC): a = 0.811 (please indicate the extent of involvement of your firm in the following activities with your primary
buyer:) b
OC1: Sharing operational information 0.451 0.023 16.17*
OC2: Coordination of production planning 0.532 0.026 16.24*
OC3: Utilization of integrated database for information sharing 0.429 0.028 16.05*
F4: Strategic coordination (SC): a = 0.723 (please indicate the extent of involvement of your firm in the following activities with your primary
buyer:) b
SC1: Strategic planning with buyer 0.534 0.031 15.72*
SC2: Planning for new products and programs with buyer 0.528 0.029 15.98*
SC3: Planning for product conception and design with buyer 0.467 0.025 16.12*
F5: Operational benefits (OB): a = 0.762 (please indicate the extent to which you are receiving the following benefits as a result of your relationship
with your primary buyer:)c
OB1: Cost efficiencies from higher sales volumes 0.714 0.025 12.26*
OB2: Improvements to current processes or creation of new processes 0.623 0.021 13.35*
OB3: Improved profitability 0.615 0.033 12.11*
F6: Strategic benefits (SB): a = 0.842 (please indicate the extent to which you are receiving the following benefits as a result of your relationship with
your primary buyer:) c
SB1: Learning about customers and markets for new products 0.743 0.034 14.36*
SB2: Creation of new products, product enhancements 0.724 0.039 14.71*
SB3: Development of new business opportunities 0.676 0.051 15.22*
a
Scale. No use – some use – significant use (1–7).
b
Scale. Not involved – moderately involved – significantly involved (1–7 scale).
c
Scale. None of this benefit – some level of benefit – high level of benefit (1–7 scale).
*
Significance at the p  0.01 level.
358 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367
to communicate with their primary buyer for the
following purposes: understanding trends in sales and
customer preferences; integrating design and manufac-
turing functions; leveraging the firm’s expertise to create
new business opportunities. These scale items address the
aspects of using IT to develop novel solutions to
problems, the definition of IT use for exploration.
The scale items used for both Factors 1 and 2 are
those developed by Subramani (2004), the only study
we are aware of that develops scale items to measure
these constructs, although the IT literature has discussed
their conceptualization at length. For example, the
influential study of DeSanctis and Poole (1994) looked
at the impact of intentionality of IT use by comparing
two groups using the same group decision support
system (GDSS), but each using a different decision
making scheme. The schemes used by the two groups
were in line with the concepts of exploitation and
exploration, with the first group allowing the GDSS
features to define the decision problem, whereas the
second group used the GDSS as a basis to brainstorm for
other alternatives. Although observations were made,
no measures were developed in the study. Similarly, the
concepts of informating and automating are discussed
in the IS literature as motives for using information
systems, but never measured (Venkatraman, 1994;
McNurlin and Sprague, 2002). The measures used in
our study, however, are conceptually comparable to
those used outside of the IT literature for measuring
exploitation and exploration. In a study that tests how
firms combine marketing strategies (Kyriakopoulos and
Moorman, 2004), marketing exploitation strategies
were measured as the extent to which the company
improves prior skills with respect to areas that include
targeting/segmentation, product positioning/differen-
tiation, and product distribution. Marketing exploration
strategies, in turn, were measured as the extent to which
the company challenged or changed prior thinking with
respect to the same areas. Similarly, in a study of
cooperative supply chain relationship strategies (Tok-
man et al., 2007), relationship agreements were defined
as exploitation oriented if their purpose was to enhance
operational processes and procedural efficiencies,
comparable to our Factor 1. On the other hand,
relationship agreements were defined as exploration
oriented if their purpose was to enhance an organiza-
tion’s ability to identify and leverage new opportunities,
comparable to our Factor 2.
Factors 3 and 4 measure operational and strategic
coordination, respectively, as perceived by the supplier.
Buyer–supplier coordination is a key element of SCM
as it enhances competitive performance through internal
information sharing that links functions of suppliers and
channel members (Choi and Hartley, 1996; Tan et al.,
1998; Zaheer et al., 1995; Vickery et al., 1999). Three
scale items are used for each factor. The scale items for
operational collaboration are: sharing operational
information, coordination of production planning,
and utilization of an integrated database for informa-
tion sharing. The three scale items address coordination
between buyer and supplier to ‘‘achieve efficient task
execution’’ as the definition of this construct, and are
modifications of scale items used in previous studies
(Vickery et al., 2003; Subramani, 2004). The three scale
items used to measure strategic collaboration are:
strategic planning with buyer, planning for new
products and programs with buyer, and planning for
product conception and design with buyer. All three
scale items address coordination between buyer and
supplier for ‘‘organizational planning and positioning
strategies’’ as the definition of this construct, and have
been used in previous studies to measure strategic
supply chain integration (Vickery et al., 2003).
However, previous studies have used these scale items
to measure coordination from the viewpoint of the buyer
rather than supplier, as in the current study.
The last two factors, F5 and F6, measure firm
performance. Firm performance has been measured in
numerous ways in past studies (Handfield and Nichols,
1999; Narasimhan and Das, 1999; Wisner, 2003), with
many studies measuring performance as a composite of
operations performance measures (Narasimhan and
Das, 2001; Scannell et al., 2000). In this study we
choose to use a complete set of organizational benefits
accrued to supplier firms, to provide a richer under-
standing of performance. Organizational benefits are
separated into two factors, operational benefits (F5) and
strategic benefits (F6). Three scale items are used to
measure each factor. Scale items for operational
benefits include: cost efficiencies from higher sales
volumes; improvements to current processes or creation
of new products; increased profitability. These scale
items specifically address benefits that arise from
lowered transaction and production costs, our definition
of operational benefits. The three scale items for
strategic benefits are: learning about customers and
markets for new products; creation of new products,
product enhancements; development of new business
opportunities. These scale items directly address the
benefits that arise through firms positioning themselves
to take advantage of opportunities arising in the
relationship, the definition of strategic benefits. The
scale items from these factors are derived from
Subramani (2004).
 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367
Table 5
Factor correlations
Mean S.D.
IT use for exploitation (IT1) 3.65 1.72
IT use for exploration (IT2) 2.36 1.19
Operational coordination (OC) 3.62 1.26
Strategic coordination (SC) 2.37 1.40
Operational benefits (OB) 2.82 1.49
Strategic benefits (SB) 3.18 1.36
Note. Correlations in bold are significant at 0.05 level.
4.4. Measure development and purification
The measures used in this study were developed
based on procedures outlined by Churchill (1979) and
DeVellis (1991). In this section we describe the
procedure used to purify the measurement scales and
ensure scale adequacy.
Scale adequacy was initially tested through the
measurement of scale reliability. Scale reliability is the
percent of variance in an observed variable that is
accounted for by the true score of the latent factor or
underlying construct (DeVellis, 1991). When scale
reliability is high then all variables that measure a single
factor share a high degree of common variance.
Cronbach’s coefficient alpha is the most commonly
employed statistic to measure internal consistency.
Specifically, the coefficient measures the degree of
inter-item correlation in each set of items and indicates
the proportion of the variance in the scale scores that is
attributable to the true score. Alpha levels below 0.7 are
considered unacceptable (DeVellis, 1991). Table 4
shows coefficient alpha values for each factor of the
study. The coefficient values range from 0.723 to 0.842,
all in the acceptable range (DeVellis, 1991). Further,
standardized coefficients, standard errors, and t-values
for variable items are also shown in Table 4, with all the
coefficients significant at the p < 0.01 level.
4.5. Convergent and discriminant validity
In order to perform meaningful analysis of the causal
model, measures used need to display certain empirical
properties. The first of these is convergent validity,
which is the degree to which individual questionnaire
items measure the same underlying construct. One way
to test for convergent validity is to evaluate whether the
individual item’s standardized coefficient from the
measurement model is significant, namely greater than
twice its standard error (Anderson and Gerbing, 1988).
An analysis of the statistics in Table 4 reveals that
coefficients for all items greatly exceed twice their
359
IT1 IT2 OC SC OB SB
1.00
0.362 1.00
0.301 0.246 1.00
0.267 0.348 0.241 1.00
0.294 0.261 0.343 0.210 1.00
0.286 0.256 0.276 0.327 0.322 1.00
standard error. Also considering that coefficients for all
variables are large and significant provides evidence of
convergent validity for the tested items.
In addition to convergent validity, to ensure
adequacy of the measurement model it is important
to measure that groups of variables intended to measure
different latent constructs display discriminant validity.
Discriminant validity addresses the extent to which
individual items intended to measure one latent
construct do not at the same time measure a different
latent construct (DeVellis, 1991). We test for discrimi-
nant validity in two ways. First, inter-factor correlations
are computed for all factors and shown in Table 5. Very
high inter-factor correlations, say approaching 1.00,
indicate that the items are measuring the same
construct, although significant inter-factor correlations
may be observed between theoretically related con-
structs. An analysis of Table 5 reveals the inter-factor
correlations to be quite low.
In addition to the simple inter-factor correlation
analysis, discriminant validity was further evaluated
through a confidence interval test. A confidence interval
of plus or minus 2 standard errors was computed around
the correlation estimates between the factors and deter-
mined whether this interval includes 1.0. In our test none
of the confidence intervals contained 1.0, demonstrating
discriminant validity (Anderson and Gerbing, 1988).
5. Results
5.1. The measurement model
Evaluation of the proposed model was made using
structural equation modeling (SEM), following the two-
step approach recommended by Anderson and Gerbing
(1988). All SEM analyses were conducted using EQS
software (Bentler, 1997), one of the most widely used
software programs for SEM (http://www.mysoft.com).
Prior to estimating the structural model in Fig. 1,
confirmatory factory analysis (CFA) was conducted to
verify the measurement model.
360 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367

Table 6
Fit statistics for measurement model
Fit statistic Overall fit measures
Notation Model value Acceptable value a
Chi-square to degrees of freedom x2/d.f. 1.972 2.0
Root mean square error of approximation RMSEA 0.056 0.06
Root mean square residual RMR 0.046 0.05
Goodness of fit index GFI 0.965 0.95
Normed fit index NFI 0.957 0.95
Comparative fit index CFI 0.968 0.95
a
Values set by Bagozzi and Yi (1998).

Table 6 presents fit statistics for the measurement
model. As recommended by researchers, multiple fit
criteria are considered in order to rule out measurement
biases (Hu and Bentler, 1999). The fit indices
considered are those most commonly recommended
for this type of analysis (Bagozzi and Yi, 1998; Byrne,
1994; Shah and Goldstein, 2006). All the indices are
within the recommended range, including ratio of chi-
square to degrees of freedom (x2/d.f. = 1.972), root
mean square error of approximation (RMSEA = 0.056),
root mean square residual (RMR = 0.046), goodness of
fit index (GFI = 0.965), normed fit index (NFI = 0.957),
and comparative fit index (CFI = 0.968). Collectively
these statistics lead us to judge the overall measurement
model fit as satisfactory (Byrne, 1994).
5.2. Structural model test results
Fig. 2 presents results of the structural model tested
evaluating overall model fit. Table 7 shows goodness of
fit statistics and Table 8 provides a summary of
hypothesis test results for the structural model. Overall
model fit indices are as follows: ratio of chi-square to
degrees of freedom (x2/d.f. = 251.84/127 = 1.983), root

**
Fig. 2. The structural model. Note. Coefficients are significant at p  0.01. Dashed line indicates insignificant paths.
 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367 361

Table 7
Goodness of fit of the structural model
Fit statistic Overall fit measures
Notation Model value Acceptable valuea
Chi-square to degrees of freedom x2/d.f. 1.983 2.0
Root mean square error of approximation RMSEA 0.058 0.06
Root mean square residual RMR 0.048 0.05
Goodness of fit index GFI 0.969 0.95
Normed fit index NFI 0.952 0.95
Comparative fit index CFI 0.956 0.95
a
Values set by Bagozzi and Yi (1998).

Table 8
Summary of hypothesis test results for structural model
Hypothesis Path Path coefficient R2 Hypothesis supported?
**
H1 g1 IT for exploitation ! operational coll. 0.431 0.526 Yes
H2 g2 IT for exploration ! strategic coll. 0.389** 0.416 Yes
H3 g3 IT for exploitation ! strategic coord. 0.098 0.025 No
H4 g4 IT for exploration ! operational coord. 0.140 0.092 No
H5 g5 Operational coord. ! operational benefits 0.394** 0.452 Yes
H6 g6 Strategic coord. ! strategic benefits 0.412** 0.490 Yes
H7 g7 Operational coord. ! strategic benefits 0.179 0.093 No
H8 g8 Strategic coord. ! operational benefits 0.287** 0.194 Yes
**
Coefficients are significant at p  0.01.

mean square error of approximation (RMSEA = 0.058),
root mean square residual (RMR = 0.048), goodness of
fit index (GFI = 0.969), normed fit index (NFI = 0.952),
and comparative fit index (CFI = 0.956). A comparison
of these values against those recommended in the
literature suggests that the model is satisfactory (Hu and
Bentler, 1999).
Next we look at findings relative to specific
hypotheses and individual paths of the model. We
begin by looking at the hypotheses that relate to pattern
of IT use and its impact on the two coordination
constructs:
H1: The higher the level of IT use for exploitation
(IT1) the greater the suppliers’ perceived level of
operational coordination (OC) in the exchange.
This hypothesis is supported, as the parameter
estimate (0.431) is significant at p  0.01.
H2: The higher the level of IT for exploration (IT2) the
greater the suppliers’ perceived level of strategic
coordination (SC) in the exchange. This hypoth-
esis is supported, as the parameter estimate
(0.389) is significant at p  0.01.
H3: The higher the level of IT for exploitation (IT1) the
greater the suppliers’ perceived level of strategic
coordination (SC) in the exchange. This hypoth-
esis is not supported, as the parameter estimate
(0.098) is not significant.
H4: The higher the level of IT for exploration (IT2) the
greater the suppliers’ perceived level of opera-
tional coordination (OC) in the exchange. This
hypothesis is not supported, as the parameter
estimate (0.140) is not significant.
This first set of findings provides interesting insights
into how pattern of IT use impacts coordination. Use for
exploitation, which is the improvement of current
processes, directly impacts operational coordination.
The measures used for each construct are typical of
those seen in past studies, which have provided support
for the positive impact of IT use on coordination
(Sanders and Premus, 2005). However, IT use for
exploitation is not found to have a direct positive impact
on strategic coordination. Similarly, IT use for
exploration, which is the development of novel ways
of using the technology, supports strategic coordination
but is not found to have a direct impact on operational
coordination. These findings suggest that each specific
pattern of IT use creates a unique and specific value to
the user, the supplier in this case.
Next, we look at the hypotheses that relate the two
coordination constructs to organizational benefits:
H5: Operational coordination (OC) has a direct and
positive impact on suppliers’ operational benefits
(OB). This hypothesis is supported, as the para-
meter estimate (0.394) is significant at p  0.01.
362 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367
H6: Strategic coordination (SC) has a direct and
positive impact on suppliers’ strategic benefits
(SB). This hypothesis is supported, as the
parameter estimate (0.412) is significant at
p  0.01.
H7: Operational coordination (OC) has a direct and
positive impact on suppliers’ strategic benefits
(SB). This hypothesis is not supported, as the
parameter estimate (0.179) is not significant.
H8: Strategic coordination (SC) has a direct and
positive impact on suppliers’ operational benefits
(OB). This hypothesis is supported, as the
parameter estimate (0.287) is significant at
p  0.01.
The findings suggest that operational and strategic
coordination each have an impact on achieving a
complete set of organizational benefits. Strategic
coordination is found to have a significant impact on
operational benefits, however operational coordination
is not found to have a significant impact on strategic
benefits. This underscores the complexity of the
construct of coordination and suggests that strategic
coordination may have an overarching impact on
benefits. Nevertheless, given that each coordination
level directly impacts its respective set of organizational
benefits, these findings support the idea that for
companies to derive both operational and strategic
benefits, coordination at both the strategic and opera-
tional levels is needed.
In our study we did test combining the two benefit
measures into one versus two factors. Chronbach’s
alpha, however, for one single factor was below the 0.7
threshold, suggesting that organizational performance
should be measured as two separate constructs.
A secondary observation from the findings is that the
mean usage of IT for exploitation significantly exceeds
the mean usage of IT for exploration (mean values 3.65
versus 2.36; a  0.05). Although not related to our
initial hypotheses, this observation suggests that firms
may use IT more for exploitation than exploration. This
has two possible explanations and potentially offers
some interesting implications. The first possible
explanation is offered by Pagell (2004), in a study
designed to understand factors that enable and inhibit
integration of operations, purchasing and logistics.
Using data from a series of case studies, Pagell (2004)
finds that although communication is a key enabler of
integration, information systems by themselves do not
play a role in integration. In fact, mechanisms of actual
face–face interaction were found to be more important
than information systems. This finding suggests that the
use of IT may in fact be more conducive for activities of
exploitation, which involve automation of processes
and bringing efficiency to tasks. By contrast, the use of
IT may not be sufficient to support activities of
exploration, which involve innovation and development
of new ideas, and may require face-to-face interaction.
A second possible explanation for this observation is
offered by March (1991) who suggests that firms indeed
engage in activities of exploitation far more than
exploration. The reason relates to organizational
learning, as exploitation results in immediate positive
local feedback that produces a strong path dependence
(March, 1991). Therefore, according to Herriott et al.
(1985), it is possible for a company to develop such a
strong competence in an inferior activity that excludes
engaging in a superior activity in which the company
has little experience. According to the authors, the
result of the tendency to engage in exploitation at the
expense of exploration has the potential of long-run
organizational self-destruction, as long-run intelli-
gence depends on sustaining a reasonable level of
exploration, and that ultimately a balance of both
activities is needed for long-run survival (March,
1991).
Both possible explanations for this secondary finding
are plausible and each has important implications for
firms. Future research would be needed to document the
necessity of both sets of behaviors relative to the use of
IT in supply chain organizations, in order to achieve
performance outcomes. Also, perhaps under certain
conditions or in certain environments one type of
behavior may be preferred over another. Although our
study is not designed to test the prevalence of IT use for
exploitation versus exploration in organizations, the
final results do offer support that both types of
coordination activities are needed to achieve both
strategic and operational benefits. The secondary
finding of this study, however, poses an important area
for future research. One possible research alternative,
for example, may be to conduct a cluster analysis of the
exploiter and explorer scales creating groupings of
strategies that could then be compared for outcome
differences. Such research would provide a much more
detailed perspective on the outcome impact of
exploitation versus exploration.
6. Discussion and implications
In this paper we tested a model of the relationship
between two patterns of IT use by suppliers when
communicating with their primary buyer, two levels of
coordination activities, and two levels of benefits
 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367
accrued to the supplier. A number of important findings
emerge from this study that have both theoretical and
managerial implications.
The first and perhaps the most salient feature of this
study is that the two complementary patterns of IT use
have a differential impact on the two constructs of
buyer–supplier collaboration, as perceived by supplier
firms. These results highlight the variations that exist in
patterns of IT use, the differences in the value provided
by each, and the importance of conveying these
differential benefits to suppliers. Business organizations
typically make large financial investments in informa-
tion technologies, often assuming that acquisition of IT
is synonymous with correct IT usage or that system
integration is automatically in place. This finding
underscores the complex relationship between the use
of IT and buyer–supplier coordination, albeit from the
viewpoint of only one member of the dyad. Coordina-
tion between supply chain partners is a result of a range
of human interactions that are supported by IT, but are
not guaranteed by the mere existence of IT. This is
important for managers to keep in mind as they consider
various information technology acquisitions. This also
underscores the complexity of organizational IT use and
offers support to the extant literature that the
‘productivity paradox’ of IT may indeed be related to
organizational factors including pattern of use.
A second contribution of this study is the finding that
the two coordination constructs, operational and
strategic coordination, each have a significant impact
on their respective organizational benefits. Specifically,
operational coordination has a significant impact on
operational benefits and strategic coordination has a
significant impact on strategic benefits, as perceived by
suppliers. Although the impact of operational coordina-
tion on strategic benefits is not significant, these
findings suggest that for suppliers to achieve a full set of
benefits, they must focus on coordination at both the
strategic and operational levels. The preponderance of
research on coordination to date has focused on the
relationship between operational coordination and a
subset of operational benefits. The dyadic relationship
of buyer and supplier characterized by the literature as
either cooperative or competitive has failed to address
the intricacies of the interaction (Choi et al., 2001;
Olsen and Ellram, 1997; Smith and Laage-Hellman,
1992; Subramani, 2004; Wu and Choi, 2005). Our
findings underscore the complexity of the causal
structure that contributes to supplier performance and
suggests that more studies are needed to engage in a
more in-depth evaluation of these constructs and their
interrelationships. Although our study looks at coordi-
363
nation from only the suppliers’ point of view, the
findings suggest that coordination at both the strategic
and operational levels is needed in order to achieve both
types of benefits, supporting theory in this area.
A third important contribution of this study relates to
the impact of IT use and buyer–supplier coordination on
a supplier, rather than buyer, benefits. As discussed
earlier, buyer–supplier coordination, as well as IT use,
has been studied extensively from the viewpoint of
buying firms. Few studies have specifically focused on
supplier benefits. The current research fills this void.
The benefits accrued to suppliers are shown to be both
strategic and operational. Although operational benefits
are not unexpected given that coordination, promoted
by IT use, is expected to streamline operations, the
strategic benefits are indeed significant. The reason is
that suppliers, compared to buying firms, are dependent
upon the type and quality of information passed on to
them by their buyers. This research demonstrates that
although suppliers are a few stages removed from the
final customer in the supply chain and are dependent
upon the buyer for the information, are still able to
derive strategic types of benefits from SC coordination
promoted by IT use.
The finding on supplier benefits is particularly
important for supplier firms as they are often smaller in
size than buyers and must appropriate larger portions of
their budgets to acquire the needed technology and skill.
This includes purchases of additional hardware and
software, staff training and time allocation, as well as
resources in developing firewall protection and security
of information. The findings in this study provide
support for the value gained by suppliers when investing
in information technologies, with the caveat that they
consider using the technology for both exploitation and
exploration.
7. Limitations and future research
The current study does have limitations that need to
be noted, and provides directions for future research.
This study focused on the types of benefits attained by
suppliers when using IT to communicate with their
primary buyer. One limitation of the current study is
that it considers information technology in the broad
sense, rather than comparing patterns of use for
different types of information technologies. There are
many different types of IT and different classifica-
tions, each potentially having a different impact on
performance. Barki et al. (1993) provided one
functional classification of IT, where IT was aggre-
gated into six categories: transaction processing
364 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367
systems, decision support systems, inter-organiza-
tional systems, communication systems, storage and
retrieval systems, and collaborative work systems.
Kendall (1997) provided another IT classification,
where IT is divided into two categories: production-
oriented information technologies and coordination-
oriented information technologies. Regardless of
classification, it can be assumed that some information
technologies have a greater impact on collaboration
and performance than others. Further, some informa-
tion technologies may be more conducive for specific
patterns of use. New information technologies are
emerging rapidly, such as the recent dominance of
wireless IT, which includes wireless devices such as
sensors, positioning locators, and networks to provide
real-time communication with anyone at any time.
Research studies should consider evaluating patterns
of use relative to type of IT and their relative
effectiveness on performance to help guide practi-
tioners in IT implementation.
Another limitation of the current study is that it looks
at pattern of IT use and associated benefits only from the
viewpoint of the supplier. Although this viewpoint is
important given the dearth of studies primarily focusing
on suppliers, it may be valuable to compare whether
findings on pattern of use apply equally to buyers and
suppliers. Given the large expenditures IT investments
require, it may be important for future work to consider
the impact of pattern of IT use relative to different types
of information technologies and their impact on
performance, from the standpoint of multiple chain
participants. This would better enable firms to make
educated decision on how to use a particular IT
throughout the supply chain network.
Some studies have suggested that to achieve supply
chain integration the use and development of informa-
tion technology should follow a preset sequence
(Narasimhan and Kim, 2001). These studies suggest
that in order for information technology to be
implemented successfully there needs to be coordina-
tion and a functional relationship between the stage of
supply chain integration and the utilization of IT. This
type of analysis suggests the complexity of this issue.
The model tested in our current study does not consider
this. Future studies may want to consider pattern of IT
use relative to the stage of supply chain integration.
Our research considers first-tier OEM suppliers from
only one environment, namely the computer industry. It
can be argued that members of that industry are
technologically savvy and thus may not represent the
manufacturing sector as a whole. Future research should
expand this type of analysis to include and compare
multiple industries. IT sophistication may well prove to
be an important factor that needs to be given
consideration.
This study used measurement scales developed in
earlier research based on a 7-point Likert scale
(Subramani, 2004), which may create another limita-
tion. To permit comparability of findings, we used the
same anchors as were used in that study, which were ‘no
use’ at one end of the scale and ‘significant use’ at the
other. Better anchors may have been selected, such as
‘‘low use’’ at one end and ‘‘high use’’ at the other, and
future studies may want to take this into account when
replicating this research. Despite these limitations, we
believe our research provides valuable insights into the
relationship of pattern of IT use, buyer–supplier
coordination as perceived by suppliers, and associated
benefits to the supplier.
8. Conclusion
The use of IT between supply chain organizations
has been thematic in recent literature, though primarily
examined from the viewpoint of buyer firms. Little
attention has been given to the benefits accrued to
suppliers from the use of these technologies, which can
require a significant allocation of resources. The
decision to make this investment is important for
supplier firms that typically must appropriate larger
portions of their budgets to develop this technological
capability. Compounding the challenge are the incon-
sistencies in the extant literature of the actual benefits of
IT use, called the ‘productivity paradox,’ and their
impact on inter-firm coordination. To date little
confirmatory evidence has been provided on the types
of benefits suppliers can expect from the use of IT and
whether differences in pattern of use impact levels of
coordination.
Using data from 241 first-tier OEM suppliers in the
computer industry, we tested a model that relates the
pattern of supplier use of IT to specific types of buyer–
supplier coordination activities and a comprehensive set
of organizational benefits. We evaluated how two
patterns of IT use by suppliers – exploitation and
exploration – relate to specific types of coordination
activities, which in turn are posited to promote specific
organizational benefits. Although both types of coordi-
nation activities are needed to achieve a full set of
benefits, we find each coordination activity to be
uniquely promoted by a specific pattern of IT use. IT use
for exploitation is found to be an antecedent to
operational coordination; IT use for exploration is
found to be an antecedent to strategic coordination. No
 N.R. Sanders / Journal of Operations Management 26 (2008) 349–367
crossover between pattern of use and coordination type
is found. Our findings show that to achieve a complete
set of benefits, suppliers must ultimately use IT for both
exploration and exploitation. These findings provide a
deeper understanding of the mechanism of how the
pattern of IT use can result in a comprehensive set of
organizational benefits for supplier firms.
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