The Interaction between Collaboration, Organisational Capacity and E-Business Diffusion and their Effect on Business Performance: Cases Study on Wenzhou Electrical Industry

The Interaction between Collaboration, Organisational Capacity and E-Business Diffusion and their Effect on Business Performance: Cases Study on Wenzhou Electrical Industry

Wu Lu (Business School, Zhejiang University City College, Hangzhou, China) and Latif Al-Hakim (School of Management, Zhejiang University, Hangzhou, China and School of Management & Enterprise, University of Southern Queensland, Australia)
Copyright: © 2016 |Pages: 22
DOI: 10.4018/JECO.2016070103
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Abstract

This study empirically tests the joint impact of trust, e-commerce diffusion and organisational capacity and collaboration and investigates the effect of the interaction among them on business performance. Basing on the literature review and seven pilot case studies, this research conducted hypotheses and mediation tests for collaboration and e-collaboration in interactive with two facilitating roles from trust and organisational capacity on business performance. Data analysis is based on a usable dataset of 395 responses (valid response rate of 79%) collected from the perspectives of CEOs and senior managers in Wenzhou China manufacturing electrical industry cluster. This research is supported by Department of Education of Zhejiang Province Foundation (Y201328223) and Priority Academic Program Development of Zhejiang Higher Education Institutions -Business Administration. Results indicate that collaboration plays a full mediator between the trust and business performance, as well as between organisational capacities and business performance; and e-business diffusion not significantly affect the output of collaboration. This result may be rationalized by the inability of these organisations to nurture an e-business diffusion culture and organisational process effectiveness in making collaboration with their trading partners and the organisations do not give attention to the with partners. The empirical evidence from this research implied that, e-business facilitated business interactions require sound organisational capacities and trusted relationship in managing wide value-chain wide interorganisational collaboration.
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Introduction

As emphasized by the President of China Mr. HU Jingtao in the G20 summit in Toronto, Canada, the manufacturing industry in China recognizes the increasing importance of interorganisational collaboration and increasingly engages in globalized partnerships with their business partners to survive. Being competitive in a globalized environment requires a holistic perspective on the proactive integration and synergy from all business partners’ activities (Zheng, 2006). Many organisations have made huge investments in electronic collaboration (e-collaboration) to link intraorganisational and intraorganisational networks and develop a variety of collaboration infrastructure to improve productivity and efficiency.

Collaboration refers to the engagement of two or more organisations in partnership for the purpose of making commitments and joint effort to achieve benefits to organisations (Wang & Archer, 2004). An e-enabled collaboration coming from e-business innovation gradually becomes an attractive phenomenon (Simatupang & Sridharan, 2004; Zheng, 2006; Trienekens, 2008; Verdechoa, Alfarob, & Rodriguez, 2009; Al-Hakim, Johnson-Morgan & Chau, 2014). E-business facilitated business interactions require sound organisational capacities in managing wide value-chain wide interorganisational collaboration and relationships (Riemer et al., 2009). In this study, we refer to the level of wireless technology used to manage and expedite information sharing and commercial transactions between partners as ‘e-business diffusion’.

Moreover, a sustained collaboration is embraced when trading partners have an atmosphere of trust and a trustful flow of information (Dong, 2009). A trusting interorganisational collaboration relationship would result in greater willingness to establish knowledge-sharing, alliances and long-term stability with each other (e.g. Matopoulos et al. 2007; Lin, 2008). Consequently, taking advantage of a high level of trust, the adoption of collaboration via e-business diffusion is expected to grow as it fosters business performance — not only for larger enterprises, but also for SMEs.

Collaboration considerably facilitates inter-organisational sharing of knowledge and information and subsequently improves business performance (Wang & Archer, 2004; Zedtwitz & Gassmann, 2002). Lack of organisational capacity is detrimental and inevitably leads to reduce the ability the organisations to quickly and effectively fill the collaboration requirements and improve the business iiIIperformance (Callioni & Billington, 2001). The impact of collaboration on business performance cannot be accomplished in isolation from organisational capacity (karsha, Escotob, Beasleyc, & Holdenb, 2006; McAdam, McConvery, & Armstrong, 2004).

While collaboration has been explored by previous studies as demonstrated in Table 1, there is no study that particularly concentrates on the interaction between trust, e-business diffusion, organisational capacity and collaboration and how such interaction affects business performance. This study looks at manufacturers’ perceptions of trust and organisational capacities towards their partners so that a comparison can be made in order to establish their influence on the effectiveness of collaboration and e-enabled collaboration adoption and in cultivating stronger business performance. This study seeks to fill this gap in the literature and attempts to answer the following research question: what’s the interaction between collaboration, trust, organisational capacity and e-business diffusion in affecting business performance?

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