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Omega 32 (2004) 395 – 405

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Business technology complementarities: impacts of the

presence and strategic timing of ERP on B2B e-commerce
technology e'ciencies
Elliot Bendolya;∗ , Frederick Kaeferb
a Decision and Information Analysis, Goizueta Business School, Emory University, 1300 Clifton Road, Atlanta, GA 30307, USA
b Information Systems and Operations Management, Loyola University Chicago, 820 North Michigan Avenue,
Chicago, IL 60611, USA
Received 1 August 2002; accepted 9 February 2004

Abstract
Enterprise resource planning (ERP) implementations have the potential of signi0cantly complementing the use of
business-to-business e-commerce technologies. We consider the sources of this complement by drawing on transaction cost
economics, and the theory of swift even 2ow. Analysis of 115 0rms shows that perceived transactional e'ciencies are greater
for B2B e-commerce technologies in the presence of ERP, and are in fact magni0ed when ERP implementation speci0cally
precedes B2B e-commerce initiatives. These 0ndings imply a distinct system adoption strategy for 0rms pursuing e-commerce
opportunities.
? 2004 Elsevier Ltd. All rights reserved.

Keywords: Enterprise resource planning; B2B e-commerce; Technology sequencing; Transactional e'ciency

1. Introduction by B2B electronic commerce technologies, allowing 0rms

Over the last decade, signi0cant advances in informa-
tion technology have provided the means for organizations
to respond much more quickly to the actual state of mar-
ket demand. The operational structure that organizations use
in responding to market demand can e7ectively be broken
into three components: inbound, internal and outbound lo-
gistics. From the perspective of internal logistics, develop-
ments in Materials Requirements Planning and Enterprise
Resource Planning (ERP) systems have been prominent.
Inbound logistics have been aided by the prospective use
of inter-organizational technologies such as Electronic Data
Interchange and more recently by emerging Business-to-
Business (B2B) electronic commerce technologies. Certain
outbound logistical activities have likewise been supported
∗ Corresponding author. Tel.: +1-4047277138; fax: +1-
4047272053.
E-mail address: elliot bendoly@bus.emory.edu (E. Bendoly).
to introduce themselves to previously unassociated buyers.
Although each of these technologies may be used indepen-
dently of any of the others, it is possible that having more
than one solution would provide more value to an orga-
nization than the value provided by each separately. This
concept has been recently identi0ed as one of the four ma-
jor value drivers enhancing the value-creation potential of
e-business, known as complementarities [1]. This study in-
vestigates the existence of complementarities between two
speci0c technologies, ERP and B2B e-commerce.
In some cases, the functionality of B2B e-commerce
technologies is built into ERP system packages marketed by
0rms. Examples of such reported capabilities can be found in
evolving versions of systems developed by well-established
ERP vendors including SAP, Oracle and Peoplesoft, which
collectively represent more than half of the ERP vendor
market by revenue. This portion of the market is also
predominantly built upon the business of large multi-
national corporations. However, the remaining ERP market,

0305-0483/$ - see front matter ? 2004 Elsevier Ltd. All rights reserved.
doi:10.1016/j.omega.2004.02.004
396 E. Bendoly, F. Kaefer / Omega 32 (2004) 395 – 405
characterized more and more by small to medium sized
enterprise (SME) adopters facing a highly fragmented pool
of developers, poses a decided contrast. A review of sur-
vey 0ndings provided by the American Production and
Inventory Control Society (APICS) shows that only 65%
of these lesser-known packages are even partially equipped
to handle purchase updates via the Internet or EDI, while
only 43% are even partially equipped with e-Payment ca-
pabilities [2]. These numbers suggest that 0rms interested
in such functionality need to rely on additional applica-
tion vendors or in-house development e7orts; an extremely
costly proposition for most SMEs.
One of the primary goals of ERP implementations is to
assure a seamless pro0le of internal enterprise processes [3].
Conversely, one of the primary goals of B2B e-commerce
technology implementations is to make inter-organizational
communication more e'cient and cost e7ective. Since
the e7ort of responding to market demand often involves
both internal processes as well as communication between
organizations in a supply chain, opportunities exist for
coordinating and/or integrating these processes to achieve
even greater bene0ts than are a7orded by each technology
independently.
With these ideas in mind, the present study draws on
the theory of swift even 2ow, transaction cost economics
and the concept of complementaries to consider how both
the mere presence of ERP systems and the relative tim-
ing of system implementations can impact the e'ciencies
of B2B electronic commerce technologies. To assess hy-
pothesized e7ects we analyze survey responses from 0rms
representing both manufacturing and service operations.
We show that the potential presence of ERP systems pos-
itively impacts future development-based transaction cost
economies associated with B2B e-commerce technologies,
while additional planning to ensure that ERP implemen-
tation precedes B2B e-commerce is backed by incentives
associated with communication-based transaction cost
savings.
2. Theoretical background
There is a growing belief that the ultimate bene0ts
of ERP implementations appear only partially through
short-term direct considerations, and largely lay in in-
direct impacts on longer term strategic plans [4]. ERP
systems, a term coined by the Gartner Group, are not
simply tools that provide singular outputs, but rather in-
frastructures that support the capabilities of all other in-
formation tools and processes utilized by a 0rm [5]. This
has represented a signi0cant deviation from the role of
MRP packages, often contained within larger ERP sys-
tems, which have traditionally been viewed strictly as tools
and not enterprise-wide transactional architectures them-
selves. ERP systems have further been distinguished by
their touted “seamless integration of processes across func-
Suppliers Market
Availability Demand Pulled
Information Information Material
B2B
Receipt
Information
Corporate
ERP
Enterprise Dispatch
Information
B2C/B2B ’s
Pulled
Availability Demand
Material
Information Information
Customer/Buyer Market
Fig. 1. Linkages provided by enterprise technology.
tional areas with improved work2ow, standardization of
various business practices, improved order management,
accurate accounting of inventory and better supply chain
management” [3]. Another common cited functionality of
ERP systems has been that of the integration of information
technologies relevant throughout the enterprise as well as
among those extending beyond the enterprise [6–8]. There-
fore the task of specifying or becoming familiar with the
functionality of an ERP system implies the development
of an understanding of both a 0rm’s internal and external
capabilities.
The focused role of integrator that ERP systems have
become synonymous with belies their developmental
history. Originally, the concept of ERP emerged from
inter-organizational, rather than intra-organizational inter-
ests [9]. This proving too di'cult an initial task, early
focus soon fell upon the development of internal enter-
prise oriented technologies. Only more recently has the
inter-organizational focus reemerged, with the development
of advanced integration-capable B2B e-commerce tech-
nologies. The integration of these advanced technologies
to incorporate inbound and outbound data and analysis to
already advanced internal enterprise systems promises to
make possible many of the theoretical bene0ts of supply
chain strategies. Fig. 1 illustrates the role of these technolo-
gies in strengthening vertical relationships.
Since the use of B2B e-commerce technologies can occur
both with regards to upstream procurement and downstream
sales activities, it is conceivable that the bene0ts perceived
by alternate usage may di7er markedly depending on a 0rm’s
relative position in this framework.
 E. Bendoly, F. Kaefer / Omega 32 (2004) 395 – 405
Table 1
ERP system product and implementation process e7ects
Example product e7ects
Variability reduction Common DB: Elimination of redundancy
and potential for multi-system data con2icts
Standardized interfaces: Reduction in
variance in human–computer and computer–computer
processing time
Bottleneck reduction Common DB: Tracking of processing times
and simpli0ed identi0cation of potential
enterprise-wide bottlenecks
Standardized interfaces: Signi0cant
reduction of time required for transactions,
in some cases eliminating bottlenecks
Waste reduction Common DB: Monitoring of speci0c forms
of waste, and prioritization of waste by
enterprise-wide cost implications
Standardized interfaces: Allowing easier
comparability of inter-departmental sources
of waste and hastens treatment
2.1. Swift even :ow
The bene0ts of ERP implementation can be categorized
by their relationship to three objectives commonly referred
to in the Operation Management literature as generating
increases in productivity: variability reduction, bottleneck
reduction and waste reduction [10]. Schmenner and Swink
have referred to the complex implications of the interac-
tions of these three elements in the discussion of what they
coin as the theory of swift even 2ow [11]. According to
this theory, as mechanisms aimed at reducing variability,
bottlenecks and wastes are put into place, the underlying
productive capability and cost e7ective potential of a sys-
tem becomes more and more transparent. In particular, this
theory proposes that synergies exist in the reduction of vari-
ability, bottlenecks and waste such that overall bene0ts of
reducing more than one of these problem sources is greater
than the sum of bene0ts associated with reductions of each
in isolation.
As suggested in a recent white paper published by Federal
Express, bene0ts of implementing ERP infrastructure map
directly onto the three issues of variability, bottleneck and
waste reduction outlined by the theory of swift even 2ow
[12]. Further delineation of these bene0ts comes through
viewing ERP implementations both from a “product” and
a “process” standpoint. This mapping is summarized in
Table 1. Falling under the ERP “product” characteristics
are features idiosyncratic to the system developer’s design,
397
Example process e7ects
Rationalization of number of business procedures:
Less uncertainty as to how a transaction will be
executed
Training/education of users: Reduced variation in
interpretations of corporate goals, operational priorities
and transactional procedures
Rationalization of number of business procedures:
Fewer processes make the identi0cation of bottleneck
sources easier, and allow for smoother reactive capacity
adjustments
Training/education of users: More workers have the
ability to recognize bottlenecks
Rationalization of number of business procedures:
Elimination of unnecessary, redundant or
waste-generating business sub-processes
Training/education of users: More workers have the
ability to recognize waste and future waste generating
processes
version and speci0c structure of the system relative to
existing enterprise operations. “Process” attributes involve
all activities associated with the implementation process
itself, from which the organizational knowledge gains and
operational process improvements develop.
One of the immediate observations from this framework
is the number of tangible bene0ts that can imply or can
be directly associated with transaction cost reductions [13].
While the transactional bene0ts posed by this framework
are enabled directly by ERP implementation and potentially
observable across multiple functions of the 0rm, these ben-
e0ts also extend to other transaction oriented systems that
may be vitally linked to ERP architectures.
2.2. Transaction cost economics
In discussing transaction cost economics, Williamson
identi0es uncertainty, complexity and information asym-
metry as critical sources of transactional ine'ciency.
Such ine'ciency is associated with di'culties in ex ante
transaction cost management, forcing additional work
such as contract adjustment to occur after B2B agree-
ments have been initiated or put into place. Reductions
in uncertainty, complexity and asymmetry alluded to by
ERP “product” and “process” e7ects therefore suggest
the potential for more e7ective use of ex ante activities
in focused transactional environments [14,15]. This fur-
ther suggests that inter-organizational transaction systems
398 E. Bendoly, F. Kaefer / Omega 32 (2004) 395 – 405
may prove to be more e7ective in the presence of ERP
technologies.
The theoretical savings alluded to by jointly consider-
ing swift even 2ow and transaction economics in ERP/B2B
e-commerce settings can be viewed both from upstream
procurement and downstream sales perspectives depicted
earlier in Fig. 1. From the procurement perspective, recent
analytical studies have shown that the integration of such ac-
tivities as purchasing or preventative maintenance planning
within an e7ective production planning scheme can provide
for considerable savings [16,17]. This integration requires
the e7ective 2ow of information between planning activi-
ties. However, the bene0ts accruable should not be viewed
as limited to intra-organizational sources. For example, al-
though ERP systems are often associated with information
control in modern production planning operations, the pur-
chasing element of MRO (maintenance, repair and opera-
tions) management necessarily associated with maintenance
planning has more recently become a critical target for B2B
e-commerce ventures. On-line marketplaces for MRO goods
have emerged due to a number of forces including the highly
fragmented supplier market, the commodity nature of many
MRO goods and the sheer volume of MRO purchases. Sub-
sequently the e7ectiveness of a 0rm’s B2B e-commerce
e7orts should also re2ect the theoretical bene0ts of plan-
ning system integration, particularly in the presence of ERP
systems.
The purchasing bene0ts from reducing uncertainty sug-
gested by swift even 2ow and transaction cost economics
are also similar to resource dependency theory arguments
[18]. According to such theory, as requirements-uncertainty
is reduced, dependency on supplier hierarchies may
also diminish. This reduced hierarchical dependency can
subsequently provide opportunities for greater purchas-
ing leverage and hence lower per-unit costs [19]. The
“demand-pull” focus of certain supply chain settings, and
increases in requirements uncertainty inherent to these
settings, suggests that the role of ERP-driven uncertainty
reduction should be particularly critical to such purchasing
gains.
Although these theorized purchasing bene0ts may be ap-
pealing to 0rms using B2B e-commerce technologies mainly
for acquisition, transactional bene0ts to 0rms attempting to
use B2B e-commerce markets for downstream interaction
can also be argued. Speci0cally if the joint application of
swift even 2ow and transaction cost economics suggests that
the presence of ERP systems encourage the bulk of sales
contracting to occur ex ante, more e'cient (swifter) and
e7ective (cheaper) purchasing options can be provided to
prospective buyers, thus encouraging greater market share
potential for sellers.
Based on both upstream and downstream B2B application
arguments, the following hypothesis emerges:
H1 . B2B e-commerce technologies provide greater levels
of transactional e'ciency in the presence of ERP sys-
tems than in scenarios where ERP systems are not in
place.
Although various de0nitions of B2B e-commerce ex-
ist [20–22], we borrow Laudon and Traver’s [23] broad
view of these technologies as providing any type of
computer-enabled inter-0rm trade, including the use of the
Internet and other networking technologies to exchange
value across organizational boundaries. Recognizing that
certain value exchanges will di7er among various B2B
e-commerce forms and participants, hypothesis H1 is de-
signed to apply generally to both buyers and sellers active
in B2B e-commerce environments. Subsequently, speci0c
testing of the hypothesis should be accompanied by a clear
distinction of these roles in order to ensure that appropriate
assessments of a subject sample can be made.
Taking this line of thinking one further step, we con-
sider the implications of timing with regards to ERP
and B2B e-commerce technology initiatives. ERP-driven
process-change e7orts impacts the very way that manage-
ment perceives of information technology, often resulting in
modi0ed planning mechanisms aimed at improving future
IT implementations and utilization. At the same time, ex-
perience illustrates that the presence of ERP systems (sup-
posedly after some level of business process reengineering
has taken place) can provide a particularly e7ective tool
to assist in the planning of reengineering e7orts associated
with future IT adoption. In fact, according to Soliman and
Youssef [24], 0rms having implemented an ERP system
0nd that their subsequent ability to integrate communication
processes provided for a “solid and open basis for global
company communication”. Such a capability is critical to
B2B e-commerce initiatives.
This system-supported integration emphasizes the
importance of the bottleneck reduction dimension of swift
even 2ow theory. In the context of ERP, this is critical since
the combined e7orts of various departments and strategic
business units in short- and medium-term planning tasks
can greatly impact operational performance [1]. When ap-
plied speci0cally to the transactional activities, for example
in order for the purchasing function to maximize its use of
B2B e-commerce technical capabilities, inter-departmental
and inter-business unit information exchange mechanisms
must be put into place to ensure that combined e7orts are
facilitated. In the presence of an ERP system, the develop-
ment of norms for such exchange mechanisms is likely to
be in2uenced by data access and standardization structures
already supported by the ERP technology. To this ex-
tent, the existing ERP technology, catering to the complex
multi-functional needs of the 0rm, can then provide a clear
foundation for B2B e-commerce technology interfaces with
the subset of critical functional areas necessary for usage.
In the absence of an ERP system however, protocols id-
iosyncratic to a sub-set of purchasing needs may arise that
might lack the robustness and standardization for exten-
sion into other functional applications. Mismatches between
 E. Bendoly, F. Kaefer / Omega 32 (2004) 395 – 405
these structures and mechanisms supported by future ERP
implementations would reduce the ability to realize comple-
mentary functional bene0ts of these systems [25]. More to
the point, the establishment of B2B e-commerce technolo-
gies and protocols in the absence of some form of ERP can
fortify the same silos that ERP implementation is designed to
knock down. Williamson [14] discusses such forti0cations
in his references to transactional designs based on attempts
to economize on governance structures that may themselves
be subject to future change (i.e. via ERP driven reengi-
neering initiatives). Thus, the argument for the importance
of technological sequencing motivates a second hypothesis
worthy of consideration:
H2 . The implementation of an ERP system before a B2B
e-commerce technology implementation provides
greater levels of transactional e'ciency than does an
ERP implementation after B2B e-commerce techno-
logy is already in place.
3. Methodology and factors
In assessing technological bene0ts accrued, we follow
Lee’s [26] recommendation of making use of tried and
accepted instruments from past IT research in otherwise
unexplored ERP contexts. Since most of the justi0cation dis-
cussed to this point has focused on transactional e'ciencies
we consider metrics relevant to that issue, such as those sug-
gested by Weill’s study into the relationships between infor-
mation technology and 0rm performance [27]. Weill’s work
builds on Turner and Lucas’s [28] framework to distinguish
transactional e'ciency from alternate e'ciency consider-
ations (e.g. informational and strategic) that can be real-
ized by a 0rm adopting new technology. The basis of trans-
actional bene0ts of such IT lay in cost reduction and the
classical economic arguments of Williamson [13] discussed
earlier.
This concept of transactional e'ciency is particularly
relevant in the context of this research for two reasons.
First, as illustrated in Fig. 1, B2B e-commerce applications
can be used in the value chain as an e'cient interface be-
tween a 0rm and its suppliers. Such IT driven e'ciency is
fundamental to the ability to witness gains posed by a shift
from supply chain to demand chain strategic emphasis. Sec-
ondly, business decision-makers must justify the bene0ts
of adopting and using a technology before they can receive
approval to proceed and be allocated resources. In deter-
mining the bene0ts of adopting and using a technology,
analyses of operational cost savings or return on invest-
ment (ROI) are commonly used to decide whether or not
to make the investment. Tangible claims of transaction cost
reductions may be easily incorporated in such assessments.
On the other hand, claims of strategic and informational
importance are often less tangible or drawn thinly across
a wide functional range and therefore their impacts are
399
Table 2
Items representative of transactional e'ciency as adopted in survey
Our use of business-to-business e-commerce technology has...
TE1 Saved us money by reducing travel costs
TE2 Saved us money by reducing communication costs
TE3 Saved us money by reducing system modi0cation or
enhancement costs
TE4 Allowed other applications to be developed faster
TE5 Allowed previously infeasible applications to be im-
plemented
TE6 Provided us with the ability to perform maintenance
faster
TE7 Saved us money by avoiding the need to increase the
work force
TE8 Enhanced employee productivity or business e'-
ciency
TE9 Increased our return on 0nancial assets
TE10 Sped up transactions or shorten product cycles
much more di'cult to consistently pinpoint for analysis
[27,29].
3.1. Data collection
In pursuing a measure for transactional e'ciency, we turn
to a recent study conducted by Mirani and Lederer [30] in
which a literature survey of major contributions to IS/IT
bene0ts theory identi0ed 33 potential bene0ts of IS projects.
From an iterative factor consideration of this set, they were
able to reduce the number of items useful in capturing
the transactional e'ciency construct to 10 (see Table 2).
These factors allowed them to identify several dimensions of
transactional e'ciency within their sample. Based on their
interpretations of the statistical loadings, these factors were
referred to respectively as communications, system develop-
ment and business (personnel/0nancial capital) e'ciency.
A majority of this reduced set (items TE1-TE4, TE7 &
TE8) can ultimately be traced back to Smith’s [31] guide-
line for IS bene0t measurement. The remaining items were
originally drawn from Orli and Tom [32] (items TE5 &
TE10) or independently introduced by Mirani and Lederer
based on pilot study conducted prior to their investigation
(items TE6 & TE9). The following table presents the re-
duced set of 7-point Likert scale (1 = not a bene0t, 7 = very
important) indicators of transactional e'ciency posed by
Mirani and Lederer [30] and adopted for the present study’s
questionnaire.
Our sample population was drawn from the 186 0rms ac-
tive in the IT Horizons Project, an ongoing e7ort by uni-
versity researchers and SME consumer electronics industry
members with a mandate to assess the evolution of tech-
nology proliferation. This population was advantageous for
two main reasons. First, all contacts for these 0rms were in-
timately familiar with the use and implementation of B2B
400 E. Bendoly, F. Kaefer / Omega 32 (2004) 395 – 405

Table 3
Descriptive statistics of transactional e'ciency items and controls

Variables Mean SD Correlations

TE1 TE2 TE3 TE4 TE5 TE6 TE7 TE8 TE9 TE10 Ln Ln
(# Partners) ($ Sales)

TE1 3.78 1.51

TE2 5.22 1.41 0:33∗∗
TE3 2.85 1.40 0.01 0.04
TE4 3.28 1.58 0:26∗∗ 0.17 0:24∗∗
TE5 3.62 1.62 0.15 0.03 0.17 0:43∗∗
TE6 3.19 1.60 0:20 ∗ 0.16 0:25 ∗∗ 0:30∗∗ 0:26∗∗
TE7 4.17 1.57 −0.04 0.14 0:19∗ 0.12 0.17 0.11
TE8 4.74 1.46 0.09 0.17 −0.03 −0.06 0.18 0.06 0:35∗∗
TE9 3.92 1.72 0.08 0:22∗ −0.08 0:20∗ 0.03 0:22∗ 0.14 0.10
TE10 5.17 1.43 0.10 −0.05 0:26 ∗∗ 0:21∗ 0.15 0.17 0.05 0.08 0:41∗∗

Ln(# Partners) 2.38 0.85 −0.05 0.01 −0.12 0.05 −0.01 0.11 −0.03 0.09 −0.18 0.13
Ln($ Sales) 9.58 3.12 −0.15 0.04 0:23∗ −0.01 0.06 −0.05 0.06 0.07 −0.10 0.07 0.16
Ln(Employees) 3.85 0.60 0.10 0.01 −0.05 −0.06 0:19∗ −0.06 0.05 0.00 0.01 −0.14 0.06 0.13
∗ Signi0cant at the p ¡ 0:05 level; ∗∗ Signi0cant at the p ¡ 0:01 level.

e-commerce and ERP technologies in their organizations.
For emphasis we also clari0ed our intended interpretations
by providing Mabert et al.’s [3] de0nition of ERP systems
(as opposed to MRP systems) and Lauden and Traver’s [23]
de0nition of B2B e-commerce technology. Second, all 0rms
involved were small- to medium-sized by virtue of their rev-
enue levels and number of employees. Beyond these speci0-
cations, the 0rms did not di7er markedly from similar 0rms
in the consumer electronics industry.
Of these 186 US 0rms, 98 were involved primarily in man-
ufacturing activities (e.g. the assembly of speakers, com-
puter monitors, electrical cables, etc.) and 88 were solely
involved with associated service sector activities such as re-
tailing. All 0rms surveyed operated at revenue levels below
$20 million. Out of these, 59 of the manufacturing 0rms
and 56 of the service 0rms already had B2B e-commerce
systems in place. Since we were concerned with 0rms us-
ing B2B e-commerce technologies with or without the pres-
ence of ERP, this e7ectively reduced our sample size to 115
0rms overall. After rounds of e-mail and phone correspon-
dence, complete responses to the 10 transactional e'ciency
items and questions on the relative timing of system adop-
tions from all 115 0rms became available for our analysis.
To counter risks of common source bias, responses to the
transactional e'ciency items in the survey were elicited by
system users while accounts of system implementation tim-
ing were provided by a'liated IS managers. For the trans-
actional e'ciency items in Table 2, a 7-point Likert scale
as used by Mirani and Leder [30] was implemented. Addi-
tional control data including 0rm size, measured by the num-
ber of employees, the estimated number of business part-
ners interacted with via the B2B technology and reported
US dollar sales levels, was also elicited from these IS man-
agers. Means, standard deviations and correlations of these
variables are provided in Table 3. Due to the skewed na-
ture of the controls gathered, natural-log transformations
of these variables, providing distributions indistinguishable
from normality by Kolmogorov–Smirno7 tests, are use here.
Only a fraction (52%) of these 0rms possessed both B2B
e-commerce and ERP technologies; an issue which we an-
ticipated and which governed our subsequent analysis. Fur-
thermore, by the beginning of the data collection phase,
those 0rms with B2B e-commerce systems had them for no
more than 2 years at the most.
3.2. Factor development
We began our investigation with the use of principle com-
ponents analysis followed by varimax rotation for the 10
indicators. Given our focus on the application of Mirani
and Lederer’s scale in to an inter-organizational rather than
a strictly intra-organizational technology, we chose not to
overly constrain the results by 0xing the number of factors
to be extracted. Instead a factor determination criteria of
eigen-values greater than ‘1’ was applied. Table 4 provides
the resulting loading factors from this reduction procedure.
Four factors were extracted, each loading heavily on the
same items in all cases. To emphasize the association of
speci0c items with derived factors, the highest loadings
of each row are provided in bold. Two of these appear to
genuinely re2ect the communication e'ciency and system
development e'ciency sub-dimensions originally observed
by Mirani and Lederer [30], with the other two representing
an apparent split within what these authors had originally
 E. Bendoly, F. Kaefer / Omega 32 (2004) 395 – 405 401

Table 4
Factor analysis for the B2B e-commerce transactional e'ciency items

Transactional e'ciency items Factors

Communications System development Personnel Capital

Saved us money by reducing travel costs 0.756 0.204 −0.105 0.012

Saved us money by reducing communication costs 0.755 −0.011 0.228 0.057
Saved us money by reducing system modi0cation or −0.239 0.820 0.059 0.035
enhancement costs
Allowed other applications to be developed faster 0.304 0.689 −0.101 0.168
Allowed previously infeasible applications to be implemented 0.101 0.686 0.204 −0.064
Provided us with the ability to perform maintenance faster 0.272 0.628 0.025 0.230
Saved us money by avoiding the need to increase the work force −0.060 0.213 0.793 0.048
Enhanced employee productivity or business e'ciency 0.147 −0.046 0.808 0.049
Increased our return on 0nancial assets 0.242 −0.074 0.122 0.857
Sped up transactions or shorten product cycles −0.164 0.306 −0.012 0.783

Variance accounted for by factor 14.8% 18.8% 14.2% 14.4%

Note: Component matrix values following varimax rotation with Kaiser normalization.

labeled their business e'ciency sub-dimension. Never-
theless, our observed split appeared to be logical in that
it divided human resource bene0ts from those gained
through other operational concerns. We refer to these two
sub-dimensions as personnel and capital (i.e. 0nancial and
physical capital) e'ciency, respectively.
Although this deviation from Mirani and Lederer’s [30]
0ndings is signi0cant, it should be noted that on a whole
the extraction approach was designed to be 2exible given
our focus on inter-organizational technologies as well as the
intra-organizational technologies to which the items were
originally applied. Given the greater level of speci0cation
utilized in selecting our sample it is not surprising that a 0ner
level of discrimination was possible. Furthermore, whereas
Mirani and Lederer’s delineation of the transactional e'-
ciency construct was theoretically justi0ed and their items
therefore useful in con0rmatory applications, their extraction
of transactional e'ciency sub-dimensions was exploratory
in nature. Since our extraction was not designed to repre-
sent theoretical expectations that future studies would also
be judged against, there was no reason to attempt to enforce
the same structure here. Similarities in our extraction can
therefore be seen as fortuitous and perhaps worthy of fur-
ther investigation in studying inter- and intra-organizational
systems, but are beyond the scope of this research.
Lastly, statistical measures derived in the analysis sup-
port the validity of our reduction scheme. For example, as
reported in Table 4, the percent of total variance accounted
for these items was shown to be 62.2%, su'ciently ade-
quate by most accepted standards [33]. This accountability
was markedly greater than the 39.1% derived from an en-
forced con0rmatory factor analysis based on a three-factor
model. Statistical support such as this encouraged our use
of these extractions as the basis for the 4 loadings-based
standardized indices used in the analysis to follow (namely
communication, system development, personnel and capital
e'ciency).
The last consideration prior to formal analysis involved
a check for potential structural di7erences among the pop-
ulation under investigation that could theoretically impair
our ability to observe the e7ects hypothesized. Along with
providing information regarding technological adoption and
performance, respondent 0rms also supplied descriptions
of their primary business interests and emphasis. These
descriptions, provided by IS managers, distinguished 0rms
on numerous levels, including whether the majority of their
business came in the form of goods fabricated or services
rendered. The distinction between 0rms in the two cate-
gories was considered important given the consideration
of such a distinction in past studies [34]. In particular,
while manufacturing 0rms responding to the questionnaire
claimed to be using B2B e-commerce technologies predom-
inantly in the role of 0rms supplying goods to downstream
partners, service 0rms surveyed characterized themselves
as using these technologies predominantly in the role of
buyers. As pointed out in our earlier discussion of theoret-
ical complementarities between ERP and B2B e-commerce
technologies, a distinction of these two types of 0rms in
subsequent analysis is therefore justi0ed since alternative
utilizations of B2B e-commerce technology could give rise
to potential di7erences in observed transactional e'ciency
gains.
4. Analysis and results
Before formally testing the hypotheses posed for each
sub-population of interest, we 0rst consider whether the
402 E. Bendoly, F. Kaefer / Omega 32 (2004) 395 – 405

Table 5
Comparisons of manufacturing and service B2B e-commerce transactional e'ciency

Firm type Mean SD Sig

Communication Manufacturing −0.29 0.71 0.219

Service 0.32 0.77
System development Manufacturing −0.30 0.56 0.000
Service 0.27 0.60
Personnel Manufacturing −0.52 0.79 0.000
Service 0.58 0.77
Capital Manufacturing −0.27 0.52 0.000
Service 0.28 0.62

Table 6
Comparisons of B2B e-commerce transactional e'ciency dimensions for 0rms with or without ERP systems

ERP presence Manufacturing 0rms Service 0rms

Mean SD Sig Mean SD Sig

Communication With ERP 0.13 0.09 0.027 0.29 0.35 0.021

Without ERP −0.41 0.09 −0.32 0.38
System development With ERP −0.24 0.13 0.023 0.30 0.28 0.037
Without ERP −0.44 0.12 0.27 0.30
Personnel With ERP −0.25 0.37 0.354 −0.52 0.40 0.485
Without ERP −0.87 0.32 −0.58 0.38
Capital With ERP 0.25 0.24 0.037 −0.27 0.26 0.436
Without ERP −0.83 0.22 −0.28 0.31

distinctions between manufacturing and service 0rms are
in fact justi0ed from a statistical standpoint. As shown in
Table 5, t-tests comparing indices (based on factor analysis
loadings) for manufacturing and service 0rms showed sig-
ni0cant di7erences at the better than 1% level in the popula-
tion means of all but communication e'ciency. Such di7er-
ences suggested that alternative mechanisms may be at play
in the two sub-populations, a concept which was well in line
with Mukhopadyhay’s [34] emphasis on the role that exoge-
nous factors can have on mechanisms of inter-organizational
IT adoption and use. This re2ects the relative positions
of manufacturers and service 0rms in the consumer elec-
tronic supply chain, where manufacturers serve as sellers
to service 0rm retailers (buyers) and therefore also re2ects
the distinctions discussed earlier between B2B e-commerce
technology bene0ts theorized for buyer and seller 0rms. In
consideration of these di7erences, all subsequent analysis
was conducted for both populations separately.
A further check considered the di7erences within these
populations with regards to speci0c control variables. Such
analysis involved additional t-test comparisons among the
0rms distinguished by alternate system implementation
sequences. Firm size, the number of downstream business
partners, sales volume and pro0t level did not prove to
signi0cantly di7er among 0rms with and without ERP, or
those with ERP before or after other technologies.
4.1. Complementarity of ERP
The evaluation of H1 involved the consideration of
di7erences in B2B e-commerce transactional e'ciency
between 0rms with and without ERP systems also in-house.
In particular, it was hypothesized that 0rms with ERP sys-
tems would show higher levels of e'ciency related to B2B
e-commerce technology use. In the case of manufacturing
0rms, the sub-populations to be compared consisted of 26
0rms using B2B e-commerce technologies in the absence
of ERP and 33 0rms with both technologies in-house. For
service 0rms, the comparative sub-populations were 29
0rms without ERP and 27 0rms with both technologies.
To ensure that the use of t-tests for comparison purposes
would be appropriate, Kolmogorov–Smirno7 tests for nor-
mality were performed for each of the four composite fac-
tors as were tests for equality in variance. No signi0cant
deviations from normality or di7erences in variation were
detected at the 5% level. Results of the subsequent mean
comparison t-tests for both manufacturing and service cate-
gorized 0rms are provided in Table 6.
For both manufacturing and service 0rms, B2B
e-commerce communication and system-development e'-
ciency ratings are signi0cantly higher when ERP systems
are in place. This suggests that 0rms with both ERP and
B2B e-commerce technologies in-house have the capacity
 E. Bendoly, F. Kaefer / Omega 32 (2004) 395 – 405 403

Table 7
Comparisons of B2B e-commerce transactional e'ciency dimensions for 0rms adopting ERP before or after B2B e-commerce

Timing Manufacturing 0rms Service 0rms

Mean SD Sig Mean SD Sig

Communication ERP Before 0.57 0.17 0.014 0.82 0.08 0.016

ERP After −0.20 0.16 −0.06 0.09
System development ERP Before −0.16 0.36 0.192 0.63 0.32 0.110
ERP After −0.38 0.32 0.28 0.45
Personnel ERP Before −0.55 0.34 0.839 0.55 0.37 0.213
ERP After −0.30 0.33 0.64 0.57
Capital ERP Before 0.58 0.15 0.037 0.34 0.30 0.323
ERP After 0.20 0.13 0.21 0.16

for smoother correspondence processing and more cost ef-
fective ramp-ups in future technologies than those without
ERP. Findings with regards to the system-development
sub-dimension are particularly interesting since they suggest
synergies that may exist between 0rms and their partners
in technology development may be signi0cantly a7ected by
the presence of ERP systems possessed by either party.
We also observe that B2B e-commerce capital e'ciency
ratings are higher with ERP for manufacturing 0rms lending
additional partial support for H1 . The signi0cance of an ERP
system role here, predominantly with respect to manufactur-
ers, is perhaps more intuitive given the accounting and mate-
rials planning capabilities that form the foundation of many
of these systems. The personnel e'ciency sub-dimension
was not shown to be signi0cant in either case. As a check
against possible low power e7ects due to the small sizes of
the separate samples, we also conducted a pooled analysis of
the manufacturing and service 0rms. While communication,
system-development and capital e'ciency di7erences be-
tween ERP and non-ERP scenarios remain signi0cant, per-
sonnel e'ciency still failed to show signi0cant di7erences
in the presence of ERP. The suggestion from this 0nding
might be that the implementation of ERP may not lead to
perceptions of greater labor productivity by users since it is
often accompanied by the need for extensive retraining and
ambiguous shifts in workload.
4.2. Bene<ts of an ERP foundation
ing ERP prior to B2B e-commerce and 20 adopting ERP
afterwards. Again Kolmogorov–Smirno7 tests were used to
check for the presence of non-normality and di7erences in
sub-population variances that might compromise the results
of t-test comparisons. No signi0cant violations from these
assumptions were detected at the 5% level. Table 7 provides
a summary of the subsequent comparisons.
Similar to the previous set of comparisons, B2B
e-commerce communication e'ciency ratings also appear
to be e7ected by the timing of ERP adoption. These rat-
ings are higher when ERP is implemented before B2B
e-commerce initiatives are begun. As suggested earlier,
informal communication structures aligned with pre-ERP
B2B e-commerce use may be a root cause for this distinc-
tion. Along with a second observation of elevated B2B
e-commerce capital e'ciency ratings, this represents par-
tial support for H2 and suggests that alternate cost savings
opportunities are the direct result of timing for manufac-
turing 0rms. Lack of signi0cant di7erences among service
0rms prevents a similar statement to be made regarding
H2 , though this may be due in part to the small sample
sizes available and relatively low power of such tests.
System-development and personnel e'ciency were not
signi0cant in either case. Pooled analysis of the manufac-
turing and service populations failed to show signi0cance
in either of these issues, though communication e'ciency
and capital e'ciency did again appear to signi0cantly di7er
between pre- and post-ERP implementations.

The evaluation of H2 represented a sub-set analysis of the

population considered in H1 . Speci0cally, only 0rms with
both B2B e-commerce and ERP technologies were consid-
ered in order to test the impact of adoption timing on trans-
actional e'ciency. This resulted in a substantial reduction
in independent population sizes available for statistical com-
parison. For manufacturing 0rms, analysis was limited to
the comparison of 12 0rms that had adopted ERP prior to
B2B e-commerce initiatives, and 21 that adopted ERP af-
terwards. For service 0rms, the population sizes were more
unbalanced, with 7 complete responses from 0rms adopt-
5. Conclusions
This research has attempted to link the e'ciencies of
inter-organizational B2B e-commerce technologies to the
bene0ts accrued through intra-organizational ERP system
adoption and implementation timing. Although many practi-
tioners and academics might intuitively speculate that some
form of complementariness would exist between ERP and
B2B e-commerce technologies, no formal framework for
these linkages has been examined empirically until now.
404 E. Bendoly, F. Kaefer / Omega 32 (2004) 395 – 405
Backed by our consideration of existing theory, our study
has provided empirical evidence supporting both the exis-
tence and speci0c nature of the bene0ts that have been ob-
served. Speci0cally, our 0ndings suggest that both the mere
presence of ERP systems and the strategic sequencing of
ERP implementations prior to B2B initiatives can signi0-
cantly increase transactional bene0ts made possible by B2B
e-commerce technologies. Furthermore, bene0ts do not oc-
cur across all transactional dimensions considered for both
manufacturing and service 0rms suggesting that more or less
attention should be applied to speci0c areas when cost jus-
ti0cation and ROI assessments are made.
The 0rst of the areas in which transactional bene0ts is
observed in our analysis is with regards to system devel-
opment cost reductions provided by B2B e-commerce tech-
nologies. When an ERP system is simultaneously present,
these bene0ts increase for both manufacturing and service
0rms. Subsequently, 0rms that also possess ERP capabili-
ties face greater cost reduction incentives when considering
the future modi0cation of B2B e-commerce technologies or
development of additional systems.
A second manifestation of ERP-driven transactional ben-
e0ts comes with regards to communication cost savings of
B2B e-commerce technologies. When ERP is in place, par-
ticularly when implemented prior to B2B e-commerce initia-
tives, these bene0ts seem to increase. Improvements in capi-
tal e'ciency was shown to be associated with ERP presence
and pre-B2B e-commerce technology implementation was
as well, though only for manufacturing 0rms. This distinc-
tion between manufacturing and service 0rms might be jus-
ti0ed if ERP bene0ts to this sub-dimension reside predom-
inantly in the product cycle function, where service 0rms
may be only indirectly involved.
However, the distinctions observed between manufacturer
and service 0rms may also stem from the greatest limitation
of the present study; speci0cally the relatively limited sam-
ple size over which a fraction of our analysis was performed.
Unfortunately, as with most studies of emerging technolo-
gies, this limitation was predominantly due to the simple
lack of 0rms capable of providing input regarding the use of
these new technologies, particularly in tandem. The trade-
o7 of course is between waiting for additional experiences
to come to light and risking the loss of importance with re-
gards to the impact that early 0ndings can provide. Future
work to lend greater veri0cation to the operationally based
hypotheses is already in progress and further encouraged for
other researchers to pursue.
An additional line of future research involves the con-
sideration of other forms of system complementarities. For
example, the presence of B2B e-commerce initiatives im-
plying a greater ability to cover shortages, and hence greater
availability at lower cost, may in turn imply a greater abil-
ity to react to consumer service needs only recognized by
B2C systems. Similarly an e-commerce “B2B before B2C”
argument might follow from the idea that experience with
B2B e-commerce systems imply a greater understanding of
incoming resource availability which in turn leads to better
understanding of exactly what customer services can be im-
proved and how. Subsequently, this awareness can lead to
a speci0c design or selection of a B2C initiative aimed at a
more appropriate customer relationship management strat-
egy. Though these are nothing more than speculations at this
point, they certainly provide interesting avenues to pursue
in the future for researchers.
Lastly, it is not di'cult to imagine that some of the “ERP
before B2B” e-commerce bene0ts observed in the study
would fade with time. Given enough experience with both
systems, 0rms would likely overcome initial performance
barriers and enjoy other unobserved bene0ts. Some may
arise from alternate e'ciency measures originally posed
by authors such as information e'ciency and strategic ef-
0ciency [13,27,28]. The consideration of such ideas might
require more complex organizational models, longitudinal
data and a greater sample size than is currently available,
but remains an intriguing possibility for future work.
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