Information Systems and Technology Sourcing Strategies of E-Retailers for Value Chain Enablement

Abstract

In the e-Retail industry, a well-designed IT infrastructure is essential in creating a tightly integrated value chain and delivering high quality service. With intense competition for market share and profits, information systems and technology (IST) sourcing decisions are becoming increasingly important to e-Retail firms to support continued growth and market responsiveness. In this research, we propose and test a theoretical model to examine organizational factors that influence an e-Retailer’s IST sourcing strategy of make versus buy in enabling its value chain activities. We evaluate the impact of sourcing decisions on firm performance and investigate the effects of complementary IST sourcing in e-Retail value chain activities. We test the proposed model using a panel data set of 338 firms over the period of 2006 to 2009. The results show that click-and-mortar retailers source a greater portion of IST for e-Retail value chain activities than Web only retailers. Features and capabilities are positively associated with IST sourcing. Firms experienced in e-Retail activities are more likely to build rather than buy their IST. We find no support for the effect of a formal IT organization (i.e., CIO leadership) on IST sourcing decisions. Our findings suggest that complementary IST sourcing of synergistic marketing and sales activities positively impacts web sales and conversion rate, but the sourcing combination of logistics, operations, and sales activities is associated with lower growth rate.

Keywords: Complementary sourcing, e-Retail value chain, information systems and technology sourcing strategy, make versus buy