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Supply chain integration, information technology, market orientation and firm performance in container
shipping firms:
Po-Hsing Tseng Chun-Hsiung Liao
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To cite this document:
Po-Hsing Tseng Chun-Hsiung Liao , (2015),"Supply chain integration, information technology, market orientation and firm
performance in container shipping firms", International Journal of Logistics Management, The, Vol. 26 Iss 1 pp. -
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http://dx.doi.org/10.1108/IJLM-09-2012-0088
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1. INTRODUCTION
Container shipping is the main actor for enhancing international trade in merchandise
unfinished goods. In particular, in the case of Taiwan, which is an island country, in terms
total volumes as measured by tons, sea transportation accounted for more than 99% of total
maritime logistics. However, supply chain integration has rarely been studied in the
container shipping industry, despite the fact that this industry has two unique
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separate study of its supply chain integration indispensable. First, while studies of the
terminal operator) is also an important issue that can affect organizational performance.
industries in terms of its global service characteristics. The container shipping industry has
faced both supply uncertainty and acceleration in customer service demand due to a
turbulent and competitive global economy. Customer need for a wider array of global
environment, container shipping firms play a key role with regard to satisfying the
requirements from shippers and consignees through effectively deploying fleets and
selecting ports. Within this atmosphere, container shipping firms need to make strategic
efforts to be competitive in the supply chain by reducing logistics costs and satisfying the
needs of customers (Lam, 2011; Lam and Voorde, 2011; Lam, 2013a; Lam, 2013b).
Basically, the customers of container shipping firms include shippers, consignees and
forwarders and offer regular services for cargo consignments. These containerized
2
transport network services (links in shipping routes and ports) are provided by many
A firm can not only achieve competitive advantage and enhance performance through
(Wanger and Frankel, 2000), but its supply chain integration should also be more
2009).
Previous studies have examined the relationship between supply chain integration and
firm performance (Droge et al., 2004), market orientation and performance (Hult et al.,
2005), IT and firm performance (Byrd and Davidson, 2003), IT application and supply
chain coordination (Hill and Scudder, 2002), and IT and market orientation (Borges et al.,
2009). While prior studies have indicated supply chain integration or coordination to be
positively associated with firm performance (Droge et al., 2004) and supply chain
integration to be influenced by IT (Hill and Scudder, 2002) and market orientation (Min et
al., 2007), no study has examined simultaneously the interactions between supply chain
integration, market orientation, IT application and firm performance. In order to fill this
gap, the objective of this paper is to examine the relationships between the above
referenced four constructs in the container shipping context. The findings can be used by
In this study, supply chain integration is investigated along with logistics functionality
for this research are not only intended to answer questions related to empirical logistics and
the supply chain, but also to verify their theoretical relationship through hypothesis testing.
The research findings will provide theoretical contributions and strategic suggestions for
researchers and practitioners. This paper is organized into five sections. The second section
reviews previous literature. The third section describes the development of the research
methodology. Section four presents the research findings. Conclusions and implications are
The supply chain is known as the connected series of activities concerned with planning,
coordinating and controlling material, parts and finished goods from the raw materials
stage to end users (Stevens, 1989). These activities include system management, sourcing
service. Cooper et al. (1997) and Lambert et al. (1998) referred to supply chain
management as the integration of key business processes from end users through original
suppliers that provide products, services and information that add value for customers and
other stakeholders. The development of an integrated supply chain usually takes three
perspectives into consideration: strategic, tactical and operational. According to Zailani and
encompassing elements of the supply chain, which are the suppliers, customers, and the
the area of container shipping provides its members with easy access to services at a
relatively low cost and allows them to share terminals (or slot sharing, vessel chartering,
joint-scheduling) to co-operate in many areas both at sea and ashore, thereby ultimately
4
achieving cost reductions (Notteboom, 2004). While several studies have proposed a
framework for supply chain integration, most of them have focused on the manufacturing
and logistics industry context (Bagchi et al., 2005; Fabbe-Costes et al., 2009; Jayaram and
Tan, 2010).
When constructing a global supply chain, manufacturers and traders must depend on an
effective maritime supply chain to integrate cargo and information flows. Thus, the
partnerships within the maritime industry (e.g., shippers, carriers and port/terminal
operators) have become important, and integrated operation experience can be learned
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from the manufacturing and logistics industry even in a regional shipping operation. In the
U.K., the integration of ports and terminals has been emphasized in maritime container
transport (Panayides and Song, 2008; Song and Panayides, 2008). Also, port industry and
and hinterland transportation chains (Franc and Horst, 2010; Langen and Chouly, 2009).
Today, several large container shipping lines, including Maersk and Orient Overseas
operations in response to the arrival and departure of ships. Firms such as China Ocean
Shipping Company (COSCO), Hanjin/Senator, K Line and Yang Ming have forged
long-term contract relationships to reduce operation costs. Further, shipping agencies use
the name of clients (e.g., shipping companies) to help and manage transportation and
freight handling services and to obtain rewards. These roles can help enhance shipping
firm’s market responsiveness and reduce administrative and operational costs in certain
shipping regions (e.g., where market scale is limited). Shipping agencies also can serve as
bridges to link with shipping firms and terminal operators in order to obtain more
guaranteed sources of cargo from shippers. Accordingly, supply chain integration not only
considers supplier integration, but this paper argues that partner integration is also an
5
important determinant of supply chain integration in container shipping operations.
The market orientation concept has its origin in a management philosophy known as the
marketing concept (Raaij and Stoelhorst, 2008). It is defined as “the organization wide
to it” (Kohli and Jaworski, 1990, p.6). Several studies have also defined and refined the
concept and measurement of market orientation (Jaworski and Kohli, 1996; Harris, 1999;
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Matsuno et al., 2005; Liao et al., 2011; Gheysari et al., 2012). Generally, the
(Narver and Slater, 1990), decision-making perspective (Glazer, 1991; Shapiro, 1988) and
customer orientation perspective (Deshpandé et al., 1993; Ruekert, 1992). In words, market
oriented organizations act as sensitive sensors to access customer needs and competitor
information via the process of collecting, sharing, and answering market knowledge with
shipping services, but it does play a key role in this industry particularly under conditions
of dynamic and fierce competition. Increasing the integration of transport services and
responding to changes in consumer demand are important factors that container shipping
up-to-date information enables shipping firms to stay ahead of competing shipping firms.
Thus, shipping companies need to remain in constant touch with their customers,
competitors, other stakeholders and the broad environment in which they operate, so as to
With the development of technology, adopting IT applications for the purpose of moving
messages and fostering a greater degree of seamlessness in transport service has become
common in container shipping due to the institutional pressure exerted by supply chain
partners (Lun et al., 2008; Makris et al., 2008; Wong et al., 2009). Notably, several studies
of this growing activity; for example, it has been shown that e-commerce and
e-collaboration can provide companies with a far more flexible and comprehensive means
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of interaction and communication with supply chain partners at a lower financial cost. Also,
with regard to RFID (radio frequency identification) application, Rizzo et al. (2011)
indicated that using an innovative active FRID system help improve security in
commercial transportation system. The application of web databases has been used for
reviewing past transport records and performance and for arranging and predicting future
container flow for supply chain partners. Service attributes of a web site in liner shipping
companies have been separated into four categories: tracing, customer response, vessel
schedules and electronic document services (Lu et al., 2005). Internet connection provides
online transaction services, market information services, support services, and performance
and equipment information. Container shipping companies provide freight rates and transit
time on website platforms from which shippers and consignees can find the information
they require about consignments. Clients can enquire about sailing schedules, track
containers and can access online auctions through a carrier’s website (Lu et al., 2007). Lun
et al. (2011) examined the relationship between firm size and the use of electronic
commerce (EC) by container transport operators in Hong Kong and the result found that
operational, management and competitive excellence of a firm and its activities. Apart
from financial performance, some nonfinancial performance indicators have been noted in
and market performance (Chen and Quester, 2006). Both Akyuz and Erkan (2010) and
Gopal and Thakkar (2012) reviewed critical literature on supply chain performance and
indicated that this issue is still a fruitful research opportunity. Cuthbertson and Piotrowicz
contended that firm performance assessment should include process reviews, customer
performance measurement reflect two main perspectives. The first is the subjective concept,
which is primarily concerned with the performance of a business relative to that of its
competitors (Golden, 1992). The second is the objective perspective, which is based on
Previous studies have indicated that supply chain integration has a positive influence on
performance outcomes (Wu, 2009). For example, Esper and Williams (2003) found that
Integrated supply chains provide operational visibility and a streamlined flow of goods that
compress the time interval between a customer’s request for a service and its delivery (Hult
et al., 2004). Based on the above studies, it is reasonable to believe that a high degree of
supply chain integration helps container shipping lines to flexibly provide integrated
8
logistics services that will satisfy customer needs and deploy suitable space for containers.
The relationship between market orientation and firm performance has been explored
and Jaworski (1990) and Jaworski and Kohli (1993) sought to confirm that market
orientation is positively related to overall firm performance in their study of the strategic
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business units of 230 US firms. Recent studies also have pointed to a positive link between
market orientation and various firm performance variables, such as profitability, market
size, market share and growth rate (Kim, 2009; Morgan et al., 2009). Studies have also
been undertaken to examine the relationship of market orientation and firm performance in
different types of firms, for example, manufacturers, wholesalers, and industrial service
firms (Martin and Grbac, 2003), and maritime logistics and logistics service provider firms
(Panayides, 2006; Ellinger et al., 2008). Kumar et al. (2011), used nine-year period data of
firms in the retailing, distribution, and manufacturing sectors and found market orientation
to have a positive effect on business performance in both the short and the long run.
The definition of market orientation emphasizes the ability of a firm to learn about
customers and competitors in order to more clearly determine the best responses to retain
or attract customers. A market-oriented firm will produce and store market information that
with other supply chain partners. Lai (2003) empirically showed that the relationship
9
between market orientation and business performance is positive in quality-oriented firms.
Min et al. (2007) found market orientation to have a strong, positive impact on supply
chain orientation and supply chain management. Supply chain orientation means the
supply chain is implemented within a firm, while supply chain management means the
supply chain is implemented by multiple firms within a supply chain. Thus, it is reasonable
to infer that effective market orientation helps to integrate various supply chain activities
The implementation of IT in the supply chain enables a firm to develop and accumulate
knowledge stores about its customers, suppliers, and market demands, which, in turn,
influences firm performance (Lambrou et al., 2008; Lun and Quaddus, 2011). Wong et al.
(2009) found that trading firms that adopted IT-enabled transport logistics could improve
advantages of IT application are reducing supply chain complexities and enabling a firm to
shipping lines reduces turnaround time for ships, which is then passed onto shippers in
terms of lower freight rates. A firm is thereby able to manage its own container supply
chain with the aid of IT application and also offer high quality services to its customers.
reduce administration costs, achieve better asset utilization at a lower cost, and improve
10
2.5.5 IT application and supply chain integration
seamless integration of entities in a supply chain because it helps firms to transmit and
Nikitakos and Lambrou (2007) indicated that information communication technology (ICT)
is becoming increasingly important for efficient and timely container processing (e.g.,
tracking and tracing) throughout the shipping value-chain. ICT adoption facilitates the
supply chain partners, reduced operation cost and better service quality. Moreover, the
automatic exchange of information helps maritime supply chain partners to become better
informed and allows them to make earlier decisions (Lambrou et al., 2008).
According to Day (1999), technology adoption is an essential condition for success that
needs to be an ally to market orientation. Min et al. (2002) reported that Internet
technologies are able to transform a traditional market orientation into a more efficient and
dissemination in the maritime market and enabled many stakeholders, not only to keep
track of the market, but also to look for the best offer and fix the best available contract
(Alizadeh and Nomikos, 2002). Overby et al. (2006) found IT utilization to positively
vital for gathering information on environmental changes, for sharing information and
knowledge, for developing market focused responses, and for supporting market
11
Hypothesis 6: IT application is positively related to market orientation.
X7
X1 X2 X3 X9 X10 X11
IT Application
X8
Supply Chain
Firm Performance
Integration
X5
Market Orientation
X6
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3. METHODOLOGY
3.1 Measures
This paper’s survey instrument was developed based on previous research, and in-depth
personal interviews were carried out with practicing experts in the container shipping
industry and academic units. The objectives of the preliminary fieldwork were two-fold.
The first objective was to explore whether there were valuable constructs that have
previously been unnoticed by the past literature and can further be applicable in practice.
The second objective was to determine if the interviews could help improve the construct
followed the framework proposed by Churchill and Iacobucci (2005). To test the
the container shipping industry. The questionnaire consisted of two parts. The first part,
12
using a nominal scale, included the demographic profiles of the respondents (e.g., age, job
title, working experience in the current firm), and firm characteristics (e.g., business type,
number of full-time employees, firm revenue, and container volume). The second part
included the measurement constructs of the research model, which were supply chain
indicators of the four constructs were all measured using a five-point Likert scale ranging
To measure supply chain integration, nine items were used from previous research
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(Braunscheidel and Suresh, 2009; Kim, 2009; Tongzon et al., 2009; Flynn et al., 2010).
Based on Jaworski and Kohli (1993) and Min et al. (2007), 13 items were used to measure
market orientation. IT application was measured using a nine-item scale measure adapted
from past studies (Lu et al., 2005; Lu et al., 2006; Lu et al., 2007; Davaraj et al., 2007;
Panayides and Song, 2008; Hsu et al., 2009; Chang et al., 2010; Kros et al., 2011; Yang et
al., 2009). Finally, using a subjective rating relative to their major competitors in the past
three years, 13 items measuring firm performance were adapted based on past studies (Kim,
2009; Richey et al., 2009; Sodhi and Son, 2009;Yang et al., 2009; Jayaram and Tan, 2010;
Li et al., 2010).
Before sending the questionnaires for data collection, a pilot test was conducted. The
CEOs, directors, or managers of thirty container shipping companies (agencies) and four
professors in the shipping management field were solicited for suggestions to improve and
Postal surveys have been the main quantitative data collection device in the supply chain,
13
marketing and IT literature due to scientific underpinnings and wide adoption (e.g.,
Bayraktar et al., 2009; Olavarrieta and Friedmann, 2008). The data were collected from a
single respondent per company. The study sample was comprised of container shipping
companies and agencies. The Directory of the National Association of Shipping Agencies
and Companies in Taiwan in 2009 was used as a source for the study’s survey.1 During
data collection, we contacted these companies by phone to determine whether or not they
were container shipping companies or agencies since bulk companies were excluded from
the research sample. Finally, key informants employed by 250 container shipping
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companies and agencies were selected from the directory referenced above and contacted
shipping companies’ managers declined to participate. Thus, key informants who agreed to
companies and 220 container shipping agencies. Survey questionnaires were mailed to key
informants in the 234 companies with a postage paid return envelope on 21 September,
2010. Follow-up telephone calls were made to improve the response rate. By 2 November,
2010, a total of 124 responses had been received, with a total usable response rate of
52.99%.2
To assess non-response bias (Amstrong and Overton, 1977), all responses received
within the first three weeks were treated as early responses, and the rest were treated as late
responses. The usable responses obtained from the first mailing (n=77) and second mailing
(n=47) were compared. The second mailing was sent out three weeks after the first mailing
(ANOVA) test, the two groups were compared on the attributes of four constructs. No
significant difference was found at the 0.05 level between the two groups.
1
Based on directory in 2009, the whole population (including container shipping companies and agencies) in
Taiwan is 250.
2
8 samples were discarded because the firms did not complete the survey instrument.
14
3.3 Respondents’ Profiles
Table 1 shows the company profiles for the respondents. With regard to business type,
88.7% of respondents’ employing companies were container shipping agencies, and 11.3%
were container shipping companies. Just under half of the respondents were
vice presidents or above, while the remaining 15.3% were clerks. As regards the number of
employees, and 21%, 19.3% and 10.5% had 101-500, 21-50, and 1,001 employees or more,
companies’ revenue also varied, with 28.2% having an annual revenues between 101-1,000
million NT dollars and 18.6% and 16.9% having an annual revenue of 50 million or less
3
US$1 is equivalent to NT$32.
4
The agency is the agent of a container shipping company at the local market. They are close stakeholders in
slot allocations, while the company delivers containers from one port to another, and the agency helps seek
the source of cargo.
15
101-1,000 35 28.2
1,001-5,000 21 16.9
5,001-50,000 7 5.7
50,000 or more 14 11.3
Missing data 4 3.2
4. RESULTS
In this paper, before the structural equation model (SEM) was analyzed, exploratory
factor analysis (EFA) and confirmatory factor analysis (CFA) were conducted sequentially.
Each of the constructs in the current model was adapted from the measurement of two or
more previous studies. The purpose of EFA is to reduce the pool of items to a smaller, more
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manageable set of underlying factors. The CFA is used to verify the reliability of each
construct in the structural equation model. Such an analytical approach is helpful to test the
properties of measurement constructs and can be found in recent top management journal
Exploratory factor analysis (EFA), using principal components extraction with varimax
rotation, was employed to derive the underlying dimensions of supply chain integration,
market orientation, IT application and firm performance since measurement items were
adopted from different sources. The results revealed that all measurement items had strong
loadings on the constructs based on the criterion of an eigenvalue greater than one (Table
2~Table 5). EFA of supply chain integration yielded three factors based on the item
loadings, labeled as partner integration, internal integration, and customer integration. The
item “firm follows up customers for feedback” was deleted due to the corrected item-total
correlation value being less than 0.5. The Cronbach’s alpha values of reliability for the
underlying factors ranged from 0.914 to 0.927 (Table 2). The market orientation EFA
information dissemination, and market responsiveness. The Cronbach’s alpha values for
16
the underlying factors ranged from 0.898 through 0.940 (Table 3). The IT application EFA
construct yielded two factors, which were website service and technology adoption. The
Cronbach’s alpha values for these two factors were 0.892 and 0.914, respectively (Table 4).
The firm performance construct was separated into three factors based on EFA, namely:
market performance, finance performance, and customer service. The Cronbach’s alpha
values for firm performance factors ranged from 0.884 to 0.943 (Table 5). Thus, all the
Cronbach’s alpha values were more than 0.7, and the corrected item-total correlation
(CITC) was more than 0.5, indicating that the constructs were reliable (see Table 6).
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17
My firm periodically circulates documents that 0.257 0.821 0.140
provide information on our customers.
My firm is quick to start business with new supply 0.731 0.320 0.356
chain partners whenever we think they are better than
existing ones.
If a major competitor were to launch an intensive 0.788 0.253 0.247
campaign targeted at our customers, my firm would
implement a response immediately.
When my firm finds that customers would like us to 0.898 0.290 0.122
modify a service, the departments involved make
concerted efforts to do so.
My firm tends to take longer than our competitors to 0.876 0.196 0.165
respond to a change in regulatory policy.
My firm is quick to respond to significant changes in 0.842 0.321 0.179
our competitors’ pricing structures.
Eigenvalue 6.827 1.585 1.384
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19
Table 6. Scale Reliabilities after Purification
CITC range
Number of Cronbach’s of the
Construct Scale
items alpha underlying
items
Partner Integration 3 0.927 0.891-0.897
Supply chain
Internal Integration 3 0.914 0.872-0.880
integration
Customer Integration 2 0.922 0.855
Information
3 0.898 0.832-0.869
generation
Information
Market orientation* 4 0.914 0.877-0.901
dissemination
Market
5 0.940 0.913-0.934
responsiveness
Website service 5 0.914 0.883-0.910
IT application
Technology adoption 4 0.892 0.847-0.869
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and the convergent and discriminant validity of the measurement items. The results
revealed a good fit with the model fit indices of χ2/d.f.=1.88, GFI=0.91, AGFI=0.84,
assessed by examining the factor loading of each item. A value exceeding 0.50 was
considered to be acceptable (Kline, 2010). The results indicated that the model was
In order to assess discriminant validity, pairs of constructs involving all possible scale
combinations were assessed in a series of two-factor CFA models using AMOS 6.0. For
each test, the differences in χ2 values and the degree of freedom between the two models
was calculated. In the first model, the estimated correlation parameter between the two
5
Based on Hair et al. (2006, p. 748), “The question of what is a ‘good’ RMSEA value is debatable but
typically values are below 0.10 for most acceptable models”.
20
constructs was fixed at 1.0. In the second model, the correlation was estimated freely. The
results were found to be of a satisfactory level ( ∆ χ2 >3.84) for all measures in this study.
All average variance extracted (AVE) and composite reliability indices were higher than
Structural equation modeling (SEM) analysis incorporates four latent variables and their
constituents. The four latent variables and their constituents were as follows in this study:
supply chain integration (three observed variables), market orientation (three observed
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variables), IT application (two observed variables), and firm performance (three observed
variables). SEM, using AMOS 6.0, was used to test the hypotheses in the model.
To increase the construct validity of the original model, the following diagnostic method
was applied: any measure(s) that had low squared multiple correlations and high
standardized residuals were eliminated from other measures of the same latent construct
(Joreskog and Sorbom, 1993). This diagnostic method revealed that item X4 had a squared
multiple correlation of 0.45 and standardized residuals of 2.6, and therefore met the
proposed.
The revised model fit indices were: χ2 statistics=45.452, χ2/d.f.= 1.602, p=0.06. With
regard to fit indices of the measurement model (Table 7), CFI (=0.972) and RMSEA
(=0.070) met the requirements of Hair et al. (2006) and Browne and Cudeck (1993).6 GFI
(=0.930) and AGFI (=0.868) are in acceptable level based on Byrne (2009) and Lu (2003).7
6
Some recent and related studies even adopted less restricted criteria for the value of RMSEA. Cao and
Zhang (2010), which investigated the relationship of supply chain and firm performance, adopted a value
of 0.09 for RMSEA in SEM analysis (See page 173, Figure 2). Zeng et al. (2013) also adopted a RMSEA
value of 0.091 to explain supply chain quality management practices and performance.
7
See Lu (2003, p410), GIF and AGFI are 0.854 and 0.802, respectively. Also, a similar value of GFI (=0.923)
and AGFI (=0.886) are adopted in Lu et al. (2007, p860).
21
NFI (=0.930) is above the recommended value of 0.800 by Chakraborty et al. (2008) and
Reyes et al. (2012).8 RMR (=0.026) met the requirements of Anderson and Gerbing
(1984).
The figures demonstrated a relatively good model fit. The model was therefore
acceptable, and the path analysis result provided strong support for all hypotheses (p<0.05),
X7 0.881
X1 X2 X3 X9 X10 X11
IT Application 0.661 0.654
X8 0.975 0.696 (-0.119) 0.749 0.618 0.768
(0.348)*
(0.623)*
(0.655)* Supply Chain
Firm Performance
Integration
(0.514)*
X5 0.713 (0.544)*
Market Orientation
X6 0.856
8
Many other related studies adopted a similar range of NFI values for CFA and SEM analysis. In the firm
performance studies of Mustafa et al. (2012), the value of NFI is 0.862 above the suggested one of 0.8 (see
Page 902). In the relationship among information technology, supply chain capabilities and firm
performance of Wu et al. (2006), the value of NFI is 0.931 (see Page 501). In this study, NFI (=0.89 and
0.93) scored a little bit below 0.9 and 0.95 for the levels of higher criteria suggested in some studies.
Nevertheless, the model fits sufficiently well with data and thus is acceptable while considering other
model fit indices using a comprehensive assessment.
22
Technology adoption; X9: Market performance; X10: Financial performance; X11: Customer service
Table 8 shows the hypotheses testing results. Five of the six hypotheses were supported.
Supply chain integration and market orientation were found to have a positive influence on
firm performance (β1=0.623, p<0.05 and β2=0.544, p<0.05); however, there was no
(β3=-0.119, p=0.334). Thus, where H1 and H2 were supported, H3 was not. In addition,
this research indicated that market orientation and IT application have positive effects on
supply chain integration (β4=0.514, p<0.05 and β5=0.348, p<0.05), thus supporting H4
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and H5. Finally, IT application was shown to have a positive effect on market orientation
This paper also measured the effects of all relationships, as shown in Table 9. Although a
direct effect of supply chain integration and market orientation on firm performance was
identified, the former (β1 =0.623) was greater than the latter (β2 =0.544). No direct effect of
IT application on firm performance was found. The factor that most directly affected
9
Although the path between the supply chain integration and firm performance (H1) exhibits high
standardized estimates (S.E.=0.241), this link has not been removed from the illustration of the model due to
two reasons. First, the C.R. value (=2.967 > 1.600) and the p value (=0.003 < 0.05) are significant. The
statistical evidence supports the positive path relationship. Second, the higher S.E. may be caused by high
variance scope of respondent’s opinions on survey constructs due to differences in selected company scales
(e.g. the scale of container shipping companies is always larger than container shipping agencies in Taiwan).
Also, since this path provides an important research relationship for this paper in order to compare the results
of past studies, we reserved this path.
23
supply chain integration was market orientation (β4 = 0.514), followed by IT application
(β5 = 0.348).
With regard to indirect effects, market orientation’s effect on firm performance was
partially mediated by supply chain integration, hence resulting in a total effect of 0.846.
Additionally, the greatest mediator between IT application and firm performance was
market orientation, with a total effect of 0.356. Finally, IT application was shown to have a
direct effect (0.348) as well as an indirect effect (0.337) on firm performance mediated by
market orientation.
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5. DISCUSSION
The finding of this study aids in understanding the relationship between supply chain
integration, market orientation, IT application and firm performance. First, the empirical
results of this study suggest that supply chain is improved with better supply chain
integration. This result is in line with the findings of earlier research (Fronhlich and
Westbrook, 2001; Kim, 2009) and confirms integration within supply chain partners, firm’s
departments and customers will help to speed up the operation process and lead to
24
enhanced performance improvement. This finding agrees with Esper and Williams (2003),
who found a positive association between cooperation and logistics service performance
within shippers and carriers. Regarding the related practices that promoted the integration
of seaport container terminals in supply chains, Panayides and Song (2008) provided some
logistics and a multimodal transport system. These strategies provide container shipping
operations and on how to develop a seamless integration service in a supply chain system.
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Second, in terms of the relationship between market orientation and firm performance,
finance performance, and customer service. This result is similar to the results of previous
research (e.g., Ellinger et al., 2008; Kim, 2009; Morgan et al., 2009; Panayides, 2006),
which empirically supports the essential role of market orientation for enhancing firm
performance.
Third, the insignificant relationship between IT application and firm performance may
be driven by differences in the business scales of respondents in the studies on this topic.
This paper mainly deals with container shipping agencies that are small and medium
enterprises, but previous research has mostly focused on large firms (e.g., Davies et al.,
2007). IT investment may have a short term negative effect on firm performance, and thus,
failure experiences that exist in some information services, such as CRM systems (see Bull,
Fourth, the paper indicated that market orientation has positive effects on supply chain
25
integration. This finding agrees with Min et al. (2007), who found that market orientation
has a positive impact on supply chain orientation and supply chain management. This
means that highly market-oriented firms usually endeavor to collect information related to
the market environment and incorporate this information in their decision making. This
leads to cooperation and alliances among partners, departments and customers, and
resource integration in the future will be further initiated. Timely container information
enables firms to coordinate business processes more efficiently with supply chain partners
and to react flexibly to customer needs. These results were also confirmed in the automated
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industry by Vickery et al. (2003), who indicated that integrated IT helps to achieve supply
chain integration.
Fifth, with regard to the relationship between IT application and supply chain
integration, this paper is consistent with the container transport study of Venus Lun et al.
(2008), which found that significant benefits in container flow management existed when
Six, IT application was shown to have a positive effect on market orientation, and this
result is in line with the findings of earlier studies (Day, 1999; Min et al., 2002). It is clear
that increasingly high levels of IT applications in container shipping lines will enhance
firm market orientation strategies. This finding supports the view of Overby et al. (2006),
utilizing Internet based technologies and e-commerce. Previous existing studies have
information (Stank et al., 1999; Day, 1999) and in promoting the market orientation
explains why firms that adopt various website services and information technologies more
26
easily understand customer preferences and adapt their service attributes in order to
performance was found in this paper; however, a non-significant direct relationship was
reported by Depning and Stratopoulos (2004). Such a finding implies that cost is an
advanced IT equipment and also suggests that they have not fully utilized the advantages
application has no impact on improving firm performance since this paper also suggests
that IT has an indirect effect on firm performance via supply chain integration, which
suggests shipping companies can use IT applications such as information exchange (e.g.
arrangement of port callings, electronic document handling) with supply chain partners.
These operational systems not only increase the efficiency of container flow but also
reduce the response time of a supply chain. The benefits can be shared between users in the
performance. This paper also indicates that supply chain integration plays a full mediating
role in the relationship between IT application and firm performance, but only a partial
mediating role in the relationship between market orientation and firm performance.
6. CONCLUSIONS
This paper presented an empirical study which examined supply chain integration,
market orientation and IT application in container shipping firms and their influence on
firm performance. Using data for 124 container shipping firms in Taiwan, SEM was
employed to test the research hypotheses. The findings indicated that IT application and
27
market orientation positively influence supply chain integration, and supply chain
integration and market orientation have a positive effect on firm performance. The results
The main theoretical contribution of this study was to develop scales in terms of supply
construct a relationship model. This is an integrated research model that provides two
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important theoretical contributions. First, this study seeks to redefine the supply chain
integration in container shipping firms. This phenomenon has not been highlighted in past
studies since only the integration related to ports and terminals have been focused on
(Panayides and Song, 2008; Song and Panayides, 2008), and this is different from
buyer-supplier relationships (Zailani and Rajagopal, 2005). Also, the internal (departmental)
integration within container shipping firms is a key part of supply chain integration, and
this has been previously defined only in terms of the relationship of purchasing and
Second, the theoretical construct of the supply chain indicated that the arcs of integration
should consider both supplier and customer (Frohlich and Westbrook, 2001). This study
provides a substantive empirical survey for both vertical and horizontal integration in
container shipping, and it adds a number of important insights to the antecedent (e.g.,
market orientation and IT application) and consequence (e.g., firm performance). While
analyzing supply chain integration in the maritime field, this study offers distinctive
performance evaluation criteria (e.g., market, finance and customer service), which are
significantly different from past port performance studies (Woo et al., 2011; Woo and Pettit,
28
2009).
The research findings have three important implications for container shipping firm
management. First, since the results indicated that supply chain integration is positively
associated with firm performance, container shipping firms should develop strategic
collaboration with their partners, such as terminal operators, freight forwarders, inland
transport operators, and shippers, in order to maintain reliable services and enhance
performance. Market and customer information can be shared within different departments
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meetings can be held to discuss customer’s needs and arrange supply chain operations.
within various transport operators (e.g., ocean transit and landside logistics), the container
shipping lines should make substantial investments in logistics assets or seek more
achieve a fully end-to-end shipping linkage service. For example, the effective movement
Alliances between the companies should be encouraged to interchange containers (e.g., one
way free use) to shorten the movement of empty container in the shortage area. These
Second, the results indicated that market orientation is a direct antecedent of supply
chain integration as well as a major factor influencing firm performance. This suggests that
critical for container shipping firms to immediately respond to changes in the market and
and endeavor to understand customers’ current and future needs through global
coordination and integrated services. In addition, in order to increase customer loyalty and
for the customers (2) arranging appropriate sailing routes in terms of frequency, punctuality,
reliability and geographical coverage to reduce transport cost (3) providing emergency
services in case of particular requirement (e.g., flexible container leasing contract during
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Finally, IT application was not found to have a direct influence on firm performance;
however, research findings indicate that IT application is positively associated with market
orientation and supply chain integration and that it has an indirect influence on firm
performance via supply chain integration. This suggests that container shipping companies
should provide real time information and feedback via an information platform among
departments (e.g., sales and IT), partners and customers. Also, online transaction records
(e.g., cargo category and origin/destination) can generate useful information and to
remember customer’s characteristics and preferences (e.g., model usage, cargo’s origin and
destination). Firms will then be able to use the collected information to segment customers,
identify which ones are the most profitable, and further develop appropriate pricing
and communication with customers. The provision of maritime electronic services should
take into account user preferences, and friendly website interfaces should be so designed as
to appeal to customers so that, in turn, they can understand and easily use these services.
This would also help to reduce human costs when many transactions or services have been
30
in advanced IT (e.g., ERP) is a financial burden in most container shipping agencies, IT
help these companies access these IT systems and, in turn, strengthen their integration
Three limitations were identified. Future studies could serve to overcome these
limitations. First, other determinants of supply chain integration and firm performance
could be considered in future studies, including organizational climate and cultural factors
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(e.g. entrepreneurial and learning orientation) (Deshpande and Farley, 2004). Second, this
paper specifically focused on container shipping firms in Taiwan. A future study could
apply this conceptual model to other industries (e.g. the airline industry) or different
integration on firm performance in various industries or areas. Finally, future studies could
be conducted using a longitudinal approach to investigate both the short- and long-term
effects of supply chain integration, market orientation, and IT application on container ship
operations.
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Acknowledgements
The first author acknowledges the partial financial support from the project NSC 102-2410-H-424 -021 under
National Science Commission in Taiwan.
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