Week2_Rai et al. (2012)_Xinyu

While much of the literature has studied the the business value of IT within a firm, limited knowledge has been explored on the cocreation of relational value between collaborative firms using interfirm relationship as a unit of analysis. Based on the relational view, Rai et al. (2012) sought to theorize interfirm IT capability and examine how this capability as well as interfirm communication help cocreate relational value.

This paper proposed that higher relational value is associated with more sophisticated interfirm IT capability profiles and more interfirm communications. The paper used the share of wallet and loyalty to represent the construct of relational value. To develop interfirm IT capability profiles, four IT functionalities were firstly distinguished in logistics industry, which is the investigative context in the paper—Single-location Shipping, Multilocation Shipping, Supply Chain Visibility and Financial Settlement. From low to high, these four IT functionalities represent different sophistication levels of interfirm IT implementation and usage to manage interdependencies in interfirm business processes. Drawn upon the four functionalities, four interfirm IT capability profiles were developed to characterize different generics of interfirm relationships, namely Logistics Automation, Logistics Coordination, Logistics Integration and Logistics Synchronization. Interfirm communications were also classified into communication for business development and communication for IT development, which were measured respectively by how frequent buyers’ executives talk to logistics firms’ account executives and IT executives.

The key results of the paper is that both interfirm IT capability profiles and interfirm communications individually and jointly support the cocreation of interfirm relational value. Meanwhile, it theorized IT capability profiles which can be formed by implementing and using sets of progressively more advanced IT functionalities. It also introduced and justified share of wallet and loyalty as two measurements of interfirm relational value cocreation.